MediumIV Macro Policy & Sovereign Debt6 October 2026, Tuesday
ECB's Nagel and Lane see no rush to hike in October
Bundesbank President Nagel on 5 October and ECB chief economist Lane on 6 October both said second-round effects do not yet look strong. Markets put the probability of rates staying at 2.50% at the 29 October meeting at around 79%.
As reported by InvestingLive, Nagel said there were no clear signs of the energy shock spreading into price and wage setting, leaving room to pause in October. He added that inflation risks remain tilted to the upside and that the ECB must stay flexible. The same report said markets assign roughly a 66% probability to a hike in December. Second-round effects are what happens when an energy price rise spreads into wages and other prices.
In an interview with ANSA cited by Investing.com, Lane said the ECB had not so far seen very strong second-round effects. In his view energy prices are high, but how strongly they pass through to the rest of the economy is uncertain. The ECB raised its deposit rate from 2.25% to 2.50% on 10 September, its second hike this year. The decision will be announced on 29 October at 16:15 TRT (UTC+3).
The constraint is that the energy shock is also hitting growth. According to figures compiled by Admiral Markets, euro area inflation was 3.2% in August and energy inflation 14.3%. Long-dated yields are rising in Europe too, which leaves part of the tightening to the market. With two senior ECB figures delivering the same message, the odds of an October hike have faded, but the door to December remains open.
Talay assessment
Bottom line
Two influential ECB voices, on consecutive days, legitimised an October pause by saying second-round effects are not yet visible. That suggests the ECB does not want to turn its response to the energy shock into a sustained hiking cycle. A December hike now hinges on wage data. The euro could stay under pressure as the rate gap with the US widens.
Likely effects
- EuroNegativeWeeks
An ECB pause while the Fed stays tight widens the rate differential against the euro, and its weakness against the dollar could persist.
- European bondsUncertainWeeks
Lower near-term rate expectations support two-year yields but do not by themselves ease fiscal worries at the far end of the curve.
- Turkish exportsPositive1–6 months
An ECB that refrains from squeezing growth further could prevent a sharper slowdown in demand in Europe, Türkiye's largest export market.
Possibilities, ranked
- 1Hold in October, door open for December60%
The ECB keeps rates at 2.50% on 29 October and stresses data dependence for December.
Watch: The September meeting account due on 8 October and the flash October inflation estimate
- 2October hike20%
Wages and services prices accelerate, and the ECB raises rates to 2.75% in October.
Watch: Euro area negotiated wage data and core inflation topping 2.5%
- 3Hiking cycle ends20%
Energy prices and growth weaken, the ECB also holds in December and effectively closes the cycle.
Watch: Brent falling and the euro area PMI nearing 50
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- ECB deposit rate▼ 2.50%
- Probability of an October hold▲ ≈79%
- Probability of a December hike▼ ≈66%
Sources
- InvestingLive — ECB policymaker Nagel keeps December rate hike in play despite case for October pause
- Investing.com — ECB's Lane: Not seeing strong second-round inflation impacts
- Admiral Markets — ECB Meeting October 2026: Dates and Hike Probability
- ZeroHedge — Key Events This Week: FOMC Minutes, UMich, And FOMC Speakers Galore