ECB Rate Hike Delayed as Lagarde Cites Tightening Conditions

European long-term government borrowing costs have surged in recent weeks, with French ten-year OAT yields increasing by 50 basis points since last month. This is the largest move seen since 2022.

Christine Lagarde, President of the European Central Bank (ECB), has attributed this rise to slowing growth and tightening financial conditions. She noted that higher long-term borrowing yields are already having a negative impact on economic activity.

Lagarde's comments suggest that the ECB may delay its next rate hike, which was previously expected in October. Instead, markets are now pricing in a rate hike in December as the more likely scenario.