ECB governors see December hike likely followed by pause, sources say

European Central ​Bank policymakers expect to increase ​interest rates ‌in December ​to fight high, energy-led inflation and then pause as a rise ‌in bond yields is set to weigh on growth and inflation, three sources told Reuters. The ECB left interest rates ‌unchanged in a well-telegraphed move on Thursday and President ‌Christine Lagarde hinted at another hike in December with a warning that high and rising energy costs were fuelling inflation risks.

Three ⁠policymakers ​who spoke ⁠to Reuters after the meeting said a hike on December ⁠17, which would take the ECB's deposit rate to 2.75%, ​was all but certain, barring a sudden collapse ⁠in energy prices. But they expected to hit the pause button thereafter, ⁠after ECB ​estimates circulated before Thursday's meeting showed that the recent increase in bond yields would lower ⁠economic growth by a cumulated 100 basis points and inflation ⁠by 90 ⁠basis points in 2027-28 compared to the September baseline projection.

An ECB spokesperson declined ‌to ‌comment.