Daily Financial Breakfast 29 October 2026: Fed Leaves Rates Unchanged at 3.75–4.00%; ECB Says Lagarde Will Step Down

Market News Today: Rate Decisions and Inflation Shape the Outlook

• 7 February 2027 will mark the end of Christine Lagarde’s presidency at the European Central Bank, which announced her planned resignation.
• A 3.75–4.00% target rate was maintained by the Federal Reserve following a 10–2 vote; the two dissenters preferred a 25-basis-point rise.
• European natural gas prices rose roughly 40% this month, MUFG reported, alongside heavy selling of French government bonds and tighter financial conditions in the euro area.
• A 25-basis-point rise brought the Bank of Canada’s overnight rate to 2.50%, as the bank highlighted inflation risks associated with energy prices and the pass-through of costs.
• A closely divided 4–3 decision kept the Reserve Bank of New Zealand’s Official Cash Rate at 2.75%, despite guidance that policy would likely need to become more restrictive.
• September headline inflation in Australia increased from August’s 4.0% to 4.3%; the third-quarter trimmed mean measure reached 3.7%.
• Signals of de-escalation efforts from U.S. and Iranian officials accompanied a Thursday pullback in WTI crude, although prices held above $100.
• Deutsche Bank put the broadly neutral impact of UK Finance Minister Healey’s Budget at GBP 1.3 billion, with the package committing to fiscal discipline and shielding households from energy costs.

Markets Register Mixed Moves

U.S. Equity Futures Split as Technology Contracts Fall

Thursday’s European trading saw a 0.37% advance in Dow Jones futures to near 52,890, against a decline in S&P 500 futures of 0.38% to around 7,750 and a 1.2% fall in Nasdaq 100 futures to near 29,620.

Dollar Holds Near 102.30 as EUR/USD Remains Subdued

After Wednesday’s modest decline, European trading left the U.S. Dollar Index near 102.30. EUR/USD was close to its lowest level since May 2025, remaining below 1.1150 in Europe after changing hands around 1.1140 in Asia. Sterling eased to approximately $1.3312, but USD/JPY showed little movement around 157.80. The losing streak in EUR/CAD, under way since 16 October, extended with the pair trading around 1.5580.

Gold Falls Below $4,050 After Three Days of Gains

The three-day rise that carried gold to a weekly high on Wednesday ended in early Asian trading on Thursday. The metal retreated to around $4,050 before breaking below that price, and remained lower later in the session.

Bitcoin Drops Through $80,000 Following Fed Hold

Thursday’s fall below $80,000 left Bitcoin with most of its weekly gains wiped out, after interest rates were kept unchanged by the Federal Reserve.

Central Banks Set Policy & Inflation Adds Pressure

Lagarde to Resign From ECB Presidency on 7 February 2027

The Governing Council has been notified by European Central Bank President Christine Lagarde that she intends to resign on 7 February 2027, according to the ECB’s announcement on Thursday.

Cook and Hammack Back Rise as Fed Retains 3.75–4.00% Range

Wednesday’s 10–2 vote at the Federal Reserve maintained the federal funds target range at 3.75–4.00%. The opposing votes were cast by Governor Lisa D. Cook and Cleveland Fed President Beth M. Hammack, each favouring a 25-basis-point rise.

Supported by “strong” productivity growth and “robust” capital investment, economic activity was expanding at a “strong pace”, the policy statement said. The committee would use additional information to establish the appropriate policy stance for returning inflation to target in a timely manner.

Relative price movements within individual sectors must not spread to the broader economy while inflation remains too high, Chair Kevin Warsh stressed. His assessment of inflation expectations and inflation compensation was nevertheless that both were moving in the right direction. He did not confirm a December rise, saying: “Quashing inflation is not about some fixed individual date on a calendar,”

Despite acknowledging that financial conditions had become more restrictive, Warsh was “unwilling and unable to call them tight”. The two-year Treasury yield was around 9 basis points lower than before the policy announcement, MUFG reported, while Brown Brothers Harriman cited a market-implied probability of 83% for a December rate rise.

According to Commerzbank, a change to the Fed’s meeting arrangements was also announced by Warsh. Eight annual meetings are still planned. However, one in 2027 will cover strategy alone, with neither a rate decision nor a statement; two will follow this approach in 2028, so that year will have six rate decisions.

French Bond Losses and Rising European Gas Prices Increase Policy Strains

Financial conditions in the euro area have tightened following heavy selling of French government bonds, as rising energy costs contribute further inflationary pressure. An increase of around 40% this month had taken European natural gas prices to fresh highs for the year to date, said MUFG’s Lee Hardman.

With September inflation at 3.8%, Hardman described higher sovereign yields, particularly those in France, as a source of unwelcome tightening that made monetary policy choices more difficult. He added that a scaling back of rate-rise expectations had brought Germany’s two-year government bond yield around 25 basis points below last month’s highs.

Further widening of the French-German government bond yield spread was noted by Commerzbank’s Antje Praefcke. In her assessment, ECB officials had presented France’s debt difficulties as primarily a matter to be resolved by the French government.

Bank of Canada Tightens Policy With Overnight Rate at 2.50%

Wednesday’s Bank of Canada rate rise amounted to 25 basis points, taking the overnight rate to 2.50%. The bank retained the option of additional tightening and warned that inflation could stay elevated if high energy prices persisted and cost pass-through intensified.

USD/CAD barely moved in Wednesday’s American session, as the widely anticipated decision initially did little to lift the Canadian dollar. By early Asian trading on Thursday, the currency was gaining strength and USD/CAD had dropped to near 1.3975. The combination of Canada’s rise and the Fed’s hold reduced the two central banks’ policy-rate differential by a quarter of a percentage point.

RBNZ Signals Further Tightening Despite 4–3 Hold at 2.75%

A widely anticipated 25-basis-point rise to 3.00% failed to materialise at the Reserve Bank of New Zealand, where a narrow 4–3 vote instead maintained the Official Cash Rate at 2.75%. Wednesday’s trading brought a 0.98% decline in NZD/USD to around 0.5625.

The economic outlook would govern when and by how much policy tightened, the central bank said, while indicating that further tightening was likely to be needed. Higher global fuel prices and the New Zealand dollar’s depreciation since September’s policy meeting accounted for much of its projected December-quarter headline inflation rate of 4.4% year on year.

Australian Inflation at 4.3% Prompts Firmer Rate-Rise Pricing

A September headline consumer price inflation rate of 4.3% year on year put Australia above the 4.2% consensus and August’s 4.0%, Brown Brothers Harriman’s Elias Haddad reported. Higher housing and transport costs were among the drivers.

The September trimmed mean measure matched consensus at 3.6%, up from 3.5%. At 3.7%, the policy-relevant third-quarter trimmed mean reading exceeded both the consensus of 3.6% and the second quarter’s 3.6%. The latest headline and underlying rates also surpassed the RBA’s August projections for year-end inflation of 3.6% and 3.3%, respectively.

The probability implied by cash-rate futures of a 25-basis-point rise to 4.85% increased from 60% to 85%, according to Haddad. AUD/USD traded near 0.7055 in Thursday’s Asian session, having gained 0.40% to 0.7053 on Wednesday.

Energy Prices React & Geopolitical Tensions Shift

WTI Retreats Above $100 as Officials Signal Iran De-Escalation Efforts

Thursday’s decline in WTI crude left prices above $100, with U.S. and Iranian officials’ comments indicating efforts to reduce tensions. Earlier support had come from renewed fears of disruption to Middle East energy supplies; WTI was around $101.20 during Asian trading.

Wednesday had brought an oil rebound after two consecutive days of losses. Following the Fed announcement, WTI was near $102.00, having reached a session high just below $103.00 before the decision. A response was expected before the weekend as Iran considered a Qatari draft agreement to end the war.

Government Decisions Shape & Fiscal Policy

Healey Pledges UK Budget Restraint Alongside Investment and Energy Support

In Wednesday’s annual Budget presentation to Parliament, UK Finance Minister Healey committed to protecting households from rising energy costs associated with the war in Iran while maintaining fiscal discipline. Investment was increased under the package, with tax rises kept limited.

The effect on the public finances was broadly neutral at GBP 1.3 billion, according to Deutsche Bank chief UK economist Sanjay Raja’s estimate. Policy measures were projected to cut borrowing by around GBP 10 billion by the forecast horizon’s end, he said, even though the tax burden was still heading for new post-war highs.

Borrowing would fall from 4.2% of GDP this fiscal year to 3.4%, and ultimately to 1.8% by 2031/32, on the path cited by Raja. Compared with the Spring Statement projections, the medium-term trajectory was nearly 0.2 percentage points higher. Deutsche Bank put the fiscal gap to be addressed in the new year at roughly GBP 25–40 billion and questioned why the planned consolidation was concentrated towards the end of the period.

Key Releases and Policy Decisions Approach

• U.S. September PCE Inflation Due (29 October 2026, 8:30 a.m. New York): DBS cited expectations of 3.6% year-on-year and 0.5% month-on-month headline inflation ahead of the scheduled September Personal Consumption Expenditures inflation release.
• U.S. Advance Third-Quarter GDP Estimate Due (29 October 2026, 8:30 a.m. New York): Analysts anticipated annualised growth of 3.2%, against 2.2% in the second quarter, ahead of the Bureau of Economic Analysis’s scheduled initial GDP estimate for July–September.
• ECB to Announce Monetary Policy Decision (29 October 2026, 13:15 GMT): At the end of its two-day meeting, the European Central Bank is due to announce its policy decision.
• Bank of Japan to Set Out Monetary Policy Decision (30 October 2026): Friday is the scheduled date for the Bank of Japan’s monetary policy decision announcement.
• Tokyo Consumer Price Inflation Release Approaches: Alongside the Bank of Japan’s policy announcement, the forthcoming inflation releases include Tokyo CPI.
• RBA to Decide Cash Rate (3 November 2026): September and third-quarter inflation data precede the Reserve Bank of Australia’s next cash rate decision.
• RBNZ to Meet on Monetary Policy (9 December 2026): After leaving the Official Cash Rate unchanged in October, the Reserve Bank of New Zealand holds its December policy meeting.