European Central Bank: Widening French spreads put communication in focus – Nordea

French government bond spreads have widened sharply and financing conditions have tightened, developments that Nordea’s Jan von Gerich highlights ahead of the ECB’s October Governing Council meeting. He expects rates to remain unchanged at that meeting, with the next 25bp increase still likely in December. As higher French yields affect a large part of the Euro area, he notes that they could shape both the tone and timing of ECB policy.

ECB to hold rates with December hike still in focus

"The ECB is set to leave rates unchanged next week, with the next hike still likely in December."

"Anything other than unchanged rates at the Governing Council meeting concluding on 29 October would be a surprise."

"We stick to our baseline of 25bp hikes in December and March 2027, which would take the deposit rate to 3.00%."

"A further significant tightening in financing conditions could leave the ECB on hold for a longer period of time, but such conclusions would be premature at this point."

"However, a clearly disorderly market reaction, spreading well beyond France, could derail a December hike."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)