ECB holds rates steady, signals further hikes if inflation persists; Euro gains

Date: 30 October 2026 (GMT+3)

Could persistent inflation trigger another ECB rate hike before year-end?

The European Central Bank (ECB) decided to hold its benchmark interest rates unchanged in line with analysts' expectations, maintaining the main refinancing rate at 2.65% and the deposit facility rate at 2.50%. In a unanimous decision, the ECB cited risks to economic growth if inflation remains elevated and trade fragmentation affects value chains across European countries.

ECB President Christine Lagarde noted the underlying resilience of economic growth, which remains positive across the services sector, manufacturing, and exports—factors that have exhibited strong results as demand for artificial intelligence (AI) increases. Additionally, the President cited robust government spending on infrastructure and defence as key drivers supporting positive economic growth.

However, President Lagarde warned that rising energy costs have exerted upward pressure on inflation, thereby weighing on consumer and business confidence as elevated fuel costs—notably natural gas and diesel—negatively impact domestic budgets. Against this backdrop, the ECB emphasised its commitment to returning inflation to its 2.0% target over the medium term, adopting a data-dependent approach and taking policy decisions on a meeting-by-meeting basis.

Currently, the ECB faces intensifying price pressures, with the inflation rate reaching 3.8% in September—its highest level in three years. Concurrently, economic growth has expanded at a moderate pace, averaging 0.3% per quarter over the last three years.

This environment points to a potential deceleration in growth should domestic consumption and private investment decline amidst persistent inflationary pressures and rising borrowing costs—particularly across long-term credit markets, where government bond yields have touched multi-year highs. These tighter financial conditions could further constrain credit availability, discourage corporate investment, and weigh on aggregate demand.

Figure 1. Euro Area Benchmark Interest Rates (2000–2026). Source: Data from the European Central Bank (EUROSYSTEM).

Additionally, President Lagarde highlighted that member state governments must strictly comply with the European Union's fiscal rules to qualify for central bank support under the Transmission Protection Instrument (TPI), as cited by Reuters. This statement was particularly notable amidst ongoing queries regarding political instability in France, where government bond yields reaching multi-year historical highs reflect significant scrutiny of sovereign financial conditions from bondholders.

Lastly, Christine Lagarde announced that she will step down early from her post in order to gain greater freedom to speak on relevant global matters beyond monetary policy. Lagarde's term was originally scheduled to expire in October 2027, but she will now depart in February 2027.

Following the ECB's monetary policy decision, the euro appreciated by 0.19% against the US dollar, with the EUR/USD currency pair closing at $1.1176. This upward movement was primarily driven by growing market expectations that the European Central Bank may implement an interest rate hike at its December meeting.

Technical analysis of the EUR/USD pair

From a technical perspective, the EUR/USD pair continues to signal market indecision as it oscillates within a defined consolidation range. Key technical observations include:

• Trend Context: Over a broader timeframe, the pair remains bound within a sideways consolidation pattern, trading below its 50-day, 100-day, and 200-day Simple Moving Averages (SMAs). This reflects a prolonged period of market indecision, although the short-term bias remains predominantly bearish. Notably, the price is testing a crucial support level where a structural technical floor converges with a long-term ascending trendline.
• Momentum Indicators: Both the Moving Average Convergence Divergence (MACD) and the Relative Strength Index (RSI) are signalling bullish divergences, indicating that potential upward momentum could emerge. Furthermore, the RSI is recovering from oversold territory, increasing the likelihood of a price rebound.
• Resistance Levels: Should the $1.1200 structural support hold and prompt a rejection to the upside, the primary resistance level sits at $1.1367—a level that converges with the Volume Profile's Value Area Low (VAL). If this technical ceiling is cleared, the next prominent resistance is $1.1558, corresponding to the 200-day SMA zone.
• Support Levels: If the $1.1200 support level is broken to the downside, the two primary technical floors are $1.1000 (a major psychological threshold) and $1.0850 (a prominent zone of volume distribution).

Figure 2. EUR/USD Currency Pair (2025–2026). Source: Data from the Intercontinental Exchange (ICE); author’s analysis conducted via TradingView.