A Month Ago, 90% of Economists Saw the ECB Pausing Through Year-End. Now 88% Bet on a December Hike.

Seventy of the seventy-three economists Reuters polled this month expect the European Central Bank to leave its deposit rate at 2.50% on October 29. Sixty-four of the same group expect the bank to raise it anyway, in December. One inflation report moved that many forecasters in under a month.

In September, when Reuters ran a similar poll, more than 90% of respondents saw the ECB holding steady through the rest of the year. By early October, that number had flipped. Only about 12% still expect a prolonged pause.

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What Changed

The number that moved the consensus is one Pulse24 already flagged: eurozone headline inflation jumped to 3.8% in September, the fastest pace since 2023, after running at 3.2% in August. Energy prices did most of the damage, rising 18.8% year over year, up from 14.3% the month before. Services inflation crept up too, to 3.2% from 3.0%.

The ECB's own forecasters have revised their outlook to match the shift. Median estimates for fourth-quarter inflation now sit at 3.7%, up from 3.3% a month earlier. Full-year figures for 2026 rose to 3.0% from 2.9%, and the 2027 projection climbed to 2.6% from 2.3%. None of those revisions scream emergency, but each one points the same direction: higher.

That makes what happened next harder to square. In the first week of October, Christine Lagarde struck what analysts described as a surprisingly dovish note, days after the inflation data landed. Her argument, as described by Ebury's Matthew Ryan, was that the rise in long-term borrowing costs since the ECB's September meeting is already doing some of the central bank's job. Pricier mortgages and corporate loans slow growth and dull the pass-through of energy costs into broader prices, the logic goes, so the ECB doesn't need to lift its own policy rate as far or as fast.

The same logic is playing out in the US Treasury market, where yields near multi-decade highs are being read as a form of tightening in their own right. Long-end borrowing costs rose well before either central bank's last meeting, which is exactly Lagarde's point: central banks aren't the only ones doing the tightening anymore.

Why It Matters

The split between what Lagarde is signaling and what economists expect her to actually do matters because it changes how markets price risk for the next two months. Societe Generale's Anatoli Annenkov points to the same mechanism Lagarde invoked: "A key argument against an October hike may be that market rates have increased meaningfully," meaning the bond market has already tightened conditions without the ECB lifting a finger. If that argument holds through December too, the hike economists are pricing might not arrive at all.

Morgan Stanley's Jens Eisenschmidt isn't so sure the cycle stops at 2.75% either way. "The main risk is there may actually be one more hike, maybe in March," he said, adding he doesn't have strong conviction the ECB stops there once it starts moving again. The spread in forecasts, 2.75% versus 3.00% versus no move at all, says less about any one economist's model and more about how unusual this setup is: an inflation rate that's accelerating even as growth forecasts get revised higher, with a central bank publicly talking down the need to act on either.

The euro has already shown how confused the signal is. EUR/USD touched 1.1161 on October 5, its weakest level since May 2025, then climbed back above 1.122 within days, even as ECB officials spent that same week playing down near-term hikes. Normally, dovish talk from a central bank weakens its currency. This time the euro rose anyway, partly because the dollar side of the pair was also losing ground.

The Fed is working through a similar split: futures markets put roughly 70% odds on a Fed move in December, while the dollar hasn't fully priced that in either. Two of the world's largest central banks are both facing a gap between what their own officials are saying and what futures and bond markets expect them to do in eight weeks. That gap, in both cases, is the thing actually worth watching, not any single week's rhetoric.

What to Watch Next

The next hard data point arrives with the flash inflation estimate due ahead of the October 29 decision. If inflation holds near 3.8% or climbs further, the case for a hawkish statement, even without an actual hike this month, gets easier for Lagarde to make. A cooler reading would strengthen her argument that bond yields are already doing the work.

Watch French and German bond markets too. Long-end yields are the entire basis for the ECB's current reasoning, so any further selloff tightens financial conditions on its own and could talk the ECB out of moving at all in December. A rally in those bonds would remove that excuse and make the 88% betting on a hike look more right than they do today.

December 17 is the next meeting with fresh staff projections, which is when the ECB would have its clearest read yet on whether September's inflation jump was a blip tied to energy costs or the start of something stickier. Markets will spend the next ten weeks trying to guess the answer before the ECB tells them.

The Pulse24 Take

A December hike wouldn't be surprising on its own. What's harder to square is economists expecting one anyway, while the ECB's own president sounds reluctant to deliver it. Central bank communication is supposed to narrow the gap between what officials say and what markets expect, not widen it. Right now in the eurozone, that gap is widening. The explanation on offer, that bond yields are quietly doing the ECB's job for it, is itself untested: yields have risen and fallen plenty of times before without stopping a central bank from also raising rates. Lagarde is betting the mechanism works as advertised this time. The economists Reuters polled aren't making the same bet. By December, one side will be proven wrong, and that will move rates, the euro and probably European credit markets all at once.