Analysts at Rabobank expect the European Central Bank (ECB) to keep its monetary policy on hold until December. According to them, October’s meeting will reflect the increased uncertainty surrounding inflation.

Key Quotes: 

“The October meeting will probably pass without any policy changes. Nonetheless, the ECB may further steer expectations towards the December policy recalibration. In light of new inflation concerns, the market is now even pricing in a rate hike for 2022. The Council may want to reiterate that the recent inflation shocks have not changed their plans of a transition phase after the end of PEPP in order to keep financing conditions favourable.”

“Speaking of that transition phase, we do not expect to get any details on the design aspects that the ECB is exploring at next week’s meeting. The workshops in which the Council discusses the available options will likely not take place until next month. In the meantime, leaks or trial balloons can certainly expected. In fact, we have already seen a few.”

“With the ECB looking to keep its options open, that leaves the route of verbal intervention: the ECB needs to stress that it is taking a different stance than most other central banks, and that the Council continues to look through the current inflation surge.”