Photo: Andrea Conti © Eurizon

By Andrea Conti, Head of Macro Market Analysis at Eurizon

The European Central Bank (ECB) is expected to leave its key interest rates unchanged. Beyond the uncertainty surrounding the geopolitical backdrop, attention is also focused on the latest moves in French bond markets.

The ECB’s next monetary policy meeting is scheduled for Thursday. The central bank is expected to keep its key rates unchanged. The deposit facility rate would therefore remain at 2.5%, and the main refinancing operations rate at 2.65%. The ECB is thus expected to confirm its cautious approach in a context still marked by geopolitical instability. Another rate increase is expected in December.

Attention is also likely to focus on the recent widening of spreads on French government bonds. This move reflects concerns about the sustainability of public finances. In this context, the ECB will probably stress that it is closely monitoring market developments and that it has the instruments needed to contain disorderly market movements.

On Friday, the first third-quarter GDP data and October inflation figures will be released for the eurozone and its main member states. Eurozone GDP growth is expected to come in at 0.2% quarter on quarter, after 0.6% in the second quarter, when growth was boosted by Ireland’s contribution. Inflation trends are expected to differ from one country to another: inflation is set to rise in France and Italy, while it should ease in Germany and Spain.

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