Financial markets are already anticipating another increase before the end of the year, with Euribor rates reflecting expectations of tighter monetary policy.

On Thursday, 29 October, the ECB announced their decision following a two-day meeting in Frankfurt, keeping its deposit rate at 2.50 percent, its main refinancing rate at 2.65 percent and its marginal lending rate at 2.90 percent, maintaining the levels introduced in September.

However, the pause may prove temporary, with investors increasingly expecting another 0.25 percentage point increase at the ECB’s next meeting on 17 December, which could take the deposit rate to 2.75 percent.

Concerns remain

Among the main factors influencing the ECB’s latest decisions are rising energy prices, as the conflict in the Middle East has pushed up oil and gas costs, creating further uncertainty over inflation across the eurozone.

Figures by the ECB show that annual inflation increased from 3.2 percent in August to 3.8 percent in September, with energy rising particularly sharply, reaching 18.9 percent, compared with 14.3 percent the previous month.

Christine Lagarde acknowledged that the possibility of raising interest rates had been discussed during Thursday’s meeting.

However, policymakers ultimately agreed to wait for more economic information before taking another step.

As reported by ECO, the ECB president said the institution was well positioned to wait and assess developments, while warning that inflation risks were rising.

The central bank also faces the challenge of controlling prices without further pressuring an already fragile European economy, as higher borrowing costs can help contain inflation, but they also make loans more expensive for households and businesses, potentially slowing investment and economic activity.

Debt crisis

The situation in France has also become a growing concern for European financial markets.

Government borrowing costs have risen across several European countries, with France attracting particular attention because of concerns surrounding its public finances and political uncertainty.

Lagarde warned that countries with high public debt should prepare for more expensive financing in the months ahead, as higher government borrowing costs can put additional pressure on national budgets and make it harder for governments to manage their debt.

Therefore, the ECB is balancing the need to control inflation against the risk that further increases in borrowing costs could weaken economic growth and financial stability.

Euribor estimates

Although the ECB has not yet announced another rate increase, Euribor has been responding to expectations of tighter monetary policy.

According to October figures published by idealista, the average three-month, six-month and 12-month Euribor rates have remained significantly higher than earlier in the year, following several months of increases.

This is already affecting Portuguese households with variable-rate mortgages.

As ECO reported on 30 October, mortgage repayments are expected to rise again in November, even though Euribor rates eased slightly during the month.

For a mortgage of €150,000 over 30 years, with a spread of 1 percent, the estimated monthly increases vary according to the Euribor index used, with three-month rising approximately €17.39, six-month by around €44.17, and 12-month at about €89 per month.

The difference depends on when the mortgage was last reviewed and the reference rate the bank uses.

These increases demonstrate how changes in Euribor can affect household budgets even when the ECB leaves its official rates unchanged.

Early departure

The meeting on 27 October also brought an unexpected announcement about the future of the central bank’s leadership.

Christine Lagarde confirmed that she will leave the presidency on 7 February 2027, several months before her scheduled mandate ends in October.

The former head of the International Monetary Fund explained that she wanted more freedom to speak publicly about issues beyond monetary policy, something she said her current position's political neutrality restricted.

As reported by ECO, Lagarde said she wanted to express her views and become involved in matters outside the ECB's responsibilities.

Her departure comes at a particularly sensitive time for Europe, with economic uncertainty, geopolitical tensions and political developments in France adding to the challenges facing the institution.

The process of finding her successor has already begun, with the European Council responsible for making the appointment.

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