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\n\t\t\t\t<\/p>\n\n\t\t\t\tRATE HIKES AND BOND TURMOIL\t\t\t<\/h2>\n<\/p><\/div>\n The ECB is in the middle of a rate-hiking cycle aimed at preventing an oil-price shock linked to the Iran war from feeding into other prices and wages.<\/p>\n
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But it must also contend with a surge in government bond yields \u2014 especially in debt-laden France \u2014 that has pushed up borrowing costs for households and businesses and which Lagarde has said will curb growth and inflation.<\/p>\n
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Caught between persistent inflation fueled by a renewed surge in energy costs and deteriorating financing conditions, the ECB is widely expected to keep its deposit rate at 2.5 per cent on Thursday while signaling that another increase, potentially as soon as December, remains likely.<\/p>\n
\u201cThere is likely a low bar to another hike in December, given the likelihood of another upward revision of the ECB\u2019s inflation forecast due to higher energy prices,\u201d Oliver Rakau at Oxford Economics said.<\/p>\n
The ECB is due to announce its interest rate decision at 1315 GMT on Thursday, followed by Lagarde\u2019s regular press conference at 1345 GMT.<\/p>\n
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\n\t\t\tMore on World<\/button>More videos<\/button>\n\t\t<\/p>\n<\/p><\/div>\nMoney markets are currently pricing another three rate increases from the ECB by the end of next year, which would take the deposit rate to 3.25 per cent, a level that is widely seen as restricting economic growth.<\/p>\n
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<\/p>\n\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t3:16<\/time>Clashes erupt across France as thousands take to the streets in protest<\/span>\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/p>\n\t\t\t\t\t\t<\/span>
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\n\t\t\t\t<\/p>\n\n\t\t\t\tFRENCH TURMOIL IN FOCUS BUT NO ACTION\t\t\t<\/h2>\n<\/p><\/div>\n The more immediate challenge for policymakers may be turmoil in bond markets.<\/p>\n
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A global rise in yields, fueled by stronger growth expectations, higher debt issuance and massive investment linked to artificial intelligence, is pushing up borrowing costs for governments, households and businesses alike.<\/p>\n
In France, investors have become increasingly uneasy about the country\u2019s growing debt burden and uncertain fiscal outlook following this year\u2019s elections. Concerns have been amplified by suggestions from parts of the political left that debt held by the ECB could be written off.<\/p>\n
The result has been a sharp increase in French borrowing costs. France is now paying some of the highest yields in a quarter-century to raise money on bond markets, while the premium investors demand to hold French debt over benchmark German bonds is larger than for any other euro zone country.<\/p>\n
That has fueled speculation that the ECB might be forced to respond, if only verbally for now.<\/p>\n
\u201cThey\u2019ve typically come up with a new tool that\u2019s customized for that specific set of circumstances,\u201d said Dangoor at Goldman Sachs.<\/p>\n
The ECB\u2019s first line of defence would probably be flexible reinvestment of proceeds from bonds acquired during its vast asset-purchase programs of the previous decade.<\/p>\n
Beyond that, it could activate its never-used Transmission Protection Instrument, a scheme designed to counter what policymakers deem unjustified market pressure.<\/p>\n
Source: <\/p>\n
: World<\/div>\n","protected":false},"excerpt":{"rendered":"
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