ECB Policymakers Eye December Rate Hike, Then Pause as Bond Yields Weigh on Growth

European Central Bank policymakers expect to raise interest rates in December to combat energy-led inflation, then pause as rising bond yields weigh on growth and inflation, three sources told Reuters. The ECB left rates unchanged Thursday, and President Christine Lagarde hinted at another hike in December, warning that high and rising energy costs were fueling inflation risks. The three policymakers said a hike on December 17, which would take the deposit rate to 2.75%, was all but certain barring a sudden collapse in energy prices. They expected to hold thereafter. ECB estimates circulated before Thursday's meeting showed the recent rise in bond yields would lower economic growth by a cumulative 100 basis points and inflation by 90 basis points in 2027-28 versus the September baseline projection. An ECB spokesperson declined to comment.