European rate watchers are leaning hawkish: a December ECB hike is widely expected in published research, even as analysts grow cautious on euro area bond spreads.
The case rests on inflation. Eurozone CPI hit 4% in October, driven by energy prices up nearly 20%, and producer prices are climbing. Several research notes see headline inflation sticking near 4% in coming months with core around 2.5%. ECB speakers, including the Bundesbank and Bank of Italy heads, have signalled a hike — and money markets now price roughly a 59% probability for December. One contrarian thread sees hikes extending into 2027, with cuts only around 2028. Denmark is expected to follow one-for-one given the currency peg.
On spreads, the published consensus is cautious. Euro government spreads are called exceptionally tight, with analysts suggesting investors avoid French paper until after the next French election. France is the key tail risk: in a scenario where RN wins a majority, research argues the OAT-Bund spread could blow through 400bp and 10-year French yields approach 7% by late 2027. That remains a tail, not a base case.
By the numbers:
• European Central Bank policy rate 2.50%, last move +25 bp on 16 Sep 2026. Next decision 17 Dec 2026.
• Market pricing (Eurex €STR futures, FinChiefs calculation, 6 Nov 2026): hike 70%, hold 30% on 17 Dec 2026; +46 bp priced by 10 Jun 2027.
• Euro area 10-year yield 3.29%, 2-year 2.96% (European Central Bank, 5 Nov 2026).
Charts: finchiefs.com/data/policy-rates/ecb