ECB holds deposit rate at 2.5% amid energy and growth risks

The European Central Bank held its deposit rate at 2.5% on October 29, warning that rising energy prices could lift inflation while weighing on economic growth. The decision leaves policymakers balancing price pressures against tighter financing conditions, including higher borrowing costs in France. The ECB said energy prices had continued to rise, posing upside risks to inflation and downside risks to growth. It described underlying inflation as broadly stable and said wages had not yet shown a material response to higher prices. However, it warned that the size and duration of the energy shock could drive inflation higher and weaken growth. The bank also said tighter financing conditions since its previous meeting were likely to weigh on both. Euro-area inflation reached 3.8% in September, up from 3.2% in August and above the ECB’s 2% target. The bank had raised rates twice earlier in 2026. Its October statement did not commit to a particular future rate path, leaving open the possibility of another increase as energy costs and economic conditions evolve. French government borrowing costs have added to the policy challenge. On October 29, the yield on French 10-year bonds...