People with knowledge of the matter said European Central Bank officials are prepared to raise interest rates in December if the inflation outlook does not improve.
The people said that, given current data and the economic impact of the Middle East war, another 25 basis point increase may be needed to curb price pressures. The people asked not to be identified because the discussions are private. They stressed that no decision has been made yet and that the situation could change quickly, especially because developments in the Middle East are hard to predict. An ECB spokesperson declined to comment.
Earlier on Thursday, ECB policymakers decided to pause rate hikes again. President Christine Lagarde announced she will step down early, a move that largely overshadowed the meeting itself. She described the direction of interest rates as "clear."
ECB President Lagarde speaks in Frankfurt. The market agrees with that assessment, with current pricing showing an 85% probability of another 25 basis point hike by the end of the year. Markets are betting the tightening campaign will extend into 2027, with at least one more increase.
Lagarde said a rate hike was discussed this week, but she and her colleagues ultimately decided to keep the deposit rate unchanged at 2.5%. That level is at the upper end of the range considered neutral for the economy.
The people said this week's discussions were very intense. Although Lagarde played down the risk that inflation is spreading from energy into broader areas, she stressed that risks are tilted to the upside. That contrasts with the economic picture, where the risk is that growth may be weaker than expected.
Data due Friday are expected to show third quarter economic growth slowed to 0.2% from 0.6% in the second quarter, although the second quarter figure was flattered by an unusually strong performance in Ireland. Consumer price growth is expected to accelerate to 3.9% from 3.8%.
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