J.P. Morgan AM: Comments on ECB meeting

30 oktober 2026

Jorn Veeneman, Global Market Strategist at J.P. Morgan Asset Management, comments on yesterday's ECB meeting:

'The ECB held the deposit rate at 2.5%, as widely expected, while signalling a likely hike in December. Lagarde said that 'unless there are major developments, the direction of travel is quite clear for all of us'. Markets currently assign a 74% probability to a December hike. The Governing Council’s decision was unanimous, and broadly stable underlying inflation and subdued wage growth give it room to assess the data received before the next meeting in December.

We continue to expect one further hike in December, in line with the view set out in our preview. Markets reacted little to a meeting that brought few surprises. Rate expectations were largely unchanged after the press conference, with 71 basis points of hikes priced by December 2027, compared with 74 basis points before the meeting.

Lagarde avoided directly addressing French fiscal sustainability or the widening of French bond spreads. She did, however, acknowledge that higher debt-servicing costs, driven by increased bond supply and higher energy prices, pose challenges for more heavily indebted countries.

We do not expect French bond-market stress to spread across the wider eurozone. Many countries at the centre of the 2011-12 eurozone crisis have since improved their primary balances. Lagarde nevertheless indicated that the ECB stands ready to use its tools, if needed, to counter disorderly spread widening and contagion.

Lagarde’s announcement that she will leave the ECB in February 2027 is attracting more attention than the rate decision. Her eight-year term as president had been due to end in October 2027, but speculation about an earlier departure had persisted for months. Leaving before the first round of the French presidential election in April could allow her to play a role in the campaign, although she has previously ruled out standing as a candidate.

Lagarde’s departure means that three of the ECB executive board’s six seats will become vacant next year. Isabel Schnabel, who oversees market operations and research, has also announced that she will leave in January 2027, nearly a year before her term ends. Chief economist Philip Lane’s term ends in May 2027.

Policy continuity is the likely outcome as Lagarde’s tenure has been characterised by collective, consensus-based decision-making, Lane will remain in post until May 2027, and the current frontrunners to succeed her have substantial central banking experience. The term for each of the appointments is eight years and these are now likely to be made ahead of elections across Europe next year that could potentially challenge the current status quo.

Klaas Knot and Pablo Hernández de Cos are the early frontrunners to succeed Lagarde, although a compromise candidate could still emerge. Knot is a former governor of the Dutch central bank and Hernández is general manager of the Bank for International Settlements and a former governor of the Bank of Spain.

Joachim Nagel, the current president of Germany’s central bank, has also been mentioned, though his appointment may be less likely while Germany currently holds the European Commission presidency through Ursula von der Leyen, whose term runs to 2029. Knot is generally seen as more hawkish than Hernández, but the other two board vacancies give eurozone member states scope to balance appointments across countries with differing policy preferences.

Negotiating the three posts together may therefore prove easier than in case they would have to be filled separately. Each new executive board member, including the ECB president, requires the support of at least 16 of the eurozone’s 21 countries.'