ECB holds at 2.5% as inflation hits 3.8%; Lagarde to leave
In short
- The ECB left rates unchanged, with the deposit rate at 2.5%. The decision was unanimous, but Lagarde said a hike was discussed.
- Euro area inflation rose to 3.8% in September from 3.2% in August, with energy up 18.9% (ECB).
- Christine Lagarde will step down after the ECB’s February 2027 meeting, ahead of the end of her term in October 2027.
The ECB held its deposit rate at 2.5%, but euro area inflation has jumped to 3.8% and a rate rise was discussed. On Wednesday we previewed the meeting: the ECB decides tomorrow, what it means for your money. The decision came yesterday, and it matters in the UK through the euro, shares and gold.
What happened
The ECB’s Governing Council left its three key rates unchanged. The decision was unanimous, but Lagarde said a hike had been discussed. The bank is not committing to a rate path and will decide meeting by meeting. The next meeting is in December, when new staff projections are due.
Euro area inflation rose to 3.8% in September from 3.2% in August. Energy inflation climbed to 18.9% from 14.3%. Excluding energy, inflation was 2.3%, up from 2.1%, with services at 3.2% and goods at 1.1%. The ECB expects headline inflation to stay well above target over the coming quarters because energy prices are above its September projections. The economy kept growing in the third quarter and unemployment was 6.4% in August, but the ECB sees the risks to growth as skewed to the downside: the Middle East conflict, Russia’s war against Ukraine and tighter financing conditions.
Lagarde will leave the presidency after the February 2027 meeting. Her term would have ended in October 2027, and a process to find a successor has started. In markets, Germany’s DAX closed on Thursday at 26,039.68 (+1.31%) and the Euro Stoxx 50 at 6,207.07 (+0.64%), according to HawkValue data.
What it means for you
The maths: at today’s rate of 0.83578 pounds per euro, a €10,000 payment is worth £8,358. Every 1% move in the euro against the pound changes that by about £84. Gold is £3,002.65 an ounce at 7:00 am Bulgarian time (5:00 am in London), and the cheapest 1 oz bar at UK dealers is £3,050.96 (Chards). A 1.31% gain, like the DAX on Thursday, would add £13.10 to £1,000 invested in a DAX tracker, before any currency effect.
An ECB decision can move the euro against the pound and the dollar and shift European bond yields and share prices, which feeds into gold and UK funds that hold European assets. Compare dealers on the UK gold prices page and follow indices on UK stock market.
Bottom line
The ECB held its deposit rate at 2.5% with inflation at 3.8% and acknowledged that a hike was discussed. The next decision is in December with new projections. Lagarde will leave after the February 2027 meeting.
Sources: ECB (monetary policy statement) · CNBC
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