AI stock rout sparks Treasury rally, pushing 10-year yield to a one-month low
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ECB sources indicate December rate hike then pause
ECB sources see a December rate hike followed by a pause; new estimates show bond yields cut growth by 100 bps and inflation by 90 bps.
29/10/2026 16:133 min read
According to ECB sources cited by Reuters,
- Policymakers anticipate a December rate increase followed by a pause.
- Fresh staff projections indicate that elevated bond yields reduce growth by a cumulative 100 bps and inflation by 90 bps in 2027-28 compared with the baseline.
Such a reduction is a significant hit to growth, particularly if ECB President Lagarde is correct that part of it stems from hyperscaler borrowing for spending in the US and Asia.
Market pricing already largely reflects a December hike, but the prospect of a pause draws attention. Policymakers might consider one additional hike sufficient, but that likely hinges on developments in the Iran and Ukraine conflicts.
The euro is experiencing some modest selling on this news, driven by the dovish signal of a pause beyond December.
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