MediumIV Macro Policy & Sovereign Debt8 October 2026, Thursday · 14:30 TRT (UTC+3)
ECB minutes leave the door open as economists eye a December hike
The ECB published the account of its 9–10 September meeting on 8 October. The hike was unanimous, with no commitment on the next step. In a Reuters poll released the same day, 64 of 73 economists expect a 25 basis point hike in December.
According to the account, all members backed chief economist Lane's proposal to raise the deposit rate from 2.25% to 2.50%. Members wanted communication to stay neutral, signalling neither a preset tightening cycle nor a final hike. At the time of the meeting, markets were pricing 84 basis points of hikes by the end of 2027, up from 64 in July. The median of the monetary analysts' survey, however, saw no hike after September, and members asked for this gap to be examined.
The account adds two details on inflation and fiscal policy. The September projections put headline inflation at 3.0% in 2026 and 2.5% in 2027. Core inflation stays above 2% across the horizon, at 2.6% in 2027. The euro area budget deficit is expected to rise from 3.0% in 2025 to 3.6% in 2026 and 3.7% in 2027. Longer-dated yields rose mainly through the real term premium, the extra real return investors demand for holding longer maturities.
In the Reuters poll of 5–8 October, 70 of 73 economists expect rates to stay at 2.50% on 29 October. For December, 64 forecast a hike, whereas more than 90% of respondents in last month's poll expected a hold. Of 70 responses on the peak rate, 40 see 2.75% and 24 see 3.00%; only two had said 3.00% a month ago. The poll puts September inflation at 3.8% and expects a fourth-quarter average of 3.7%.
Talay assessment
Bottom line
The account shows the ECB will not rush in October, but it has not declared the cycle over either. Economists' peak-rate expectations shifted up within a month, and those calling 3.00% rose from 2 to 24. The most likely path is a hold in October and a 25 basis point hike in December. Wider budget deficits are keeping yields at the far end elevated regardless of the policy rate.
Likely effects
- Euro area bondsNegative1–6 months
A deficit rising to 3.7% and a higher real term premium keep yields on extended maturities elevated even if the ECB holds.
- EuroUncertainWeeks
Expectations of a December hike support the euro, but with the Fed also on a hiking path the rate differential stays broadly unchanged.
- Turkish exportersNegative1–6 months
Continued ECB tightening cools European demand and weighs on export volumes to Germany and the EU, Türkiye's largest market.
Possibilities, ranked
- 1Hold in October, hike in December60%
The ECB stays at 2.50% on 29 October and moves to 2.75% at the December meeting.
Watch: October flash inflation and market pricing of a December hike
- 2Hike in October20%
October flash inflation tops 4% and the ECB stops waiting.
Watch: Members' speeches signalling an October hike
- 3Peak stays at 2.50%20%
Energy prices ease, no second-round effects appear and the ECB holds in December too.
Watch: Brent falling below 90 dollars, and wage data
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- Expecting a December hike▼ 64/73
- Seeing a 3.00% peak▼ 24 (previously 2)
- Euro area deficit 2027▼ 3.7% of GDP