{
  "id": 12225838,
  "title": "Markets just priced out rate hikes on financial stress. This chart shows why 2022-23 says they’ll be wrong",
  "url": "https://urgent.news/2026/10/05/markets-just-priced-out-rate-hikes-on-financial-stress-this-chart",
  "topic": "finance",
  "section": "Finance & Markets",
  "published": "2026-10-05T18:43:38.000Z",
  "source": {
    "name": "FXStreet",
    "slug": "fxstreet",
    "url": "https://www.fxstreet.com/news/markets-just-priced-out-rate-hikes-on-financial-stress-this-chart-shows-why-2022-23-says-theyll-be-wrong-202610051843"
  },
  "original_language": "en",
  "account": "Since mid-September, traders have reduced their expectations of European Central Bank (ECB) rate hikes by about a quarter-point due to concerns over financial stress in Europe. This belief stems from a French debt selloff, which has failed twice in 2022 and 2023 when the ECB continued raising rates despite inflation exceeding its 2% target. Euro-area inflation remained at 3.8% in September, despite the ECB raising its deposit rate to 2.50% after hikes in June and September.\n\nGermany's two-year bond yield, which reflects traders' expectations of the ECB, hit a high of 3.32% on September 28, the highest since October 2008. This yield has since decreased by 0.3 points to 3.02%. The widening gap between French and German 10-year borrowing costs reached 1.54 percentage points on October 2, the widest since 2011, a significant increase from previous levels.\n\nThis heightened financial tension spilled over to other European economies, with Italian, Belgian, and Greek bonds experiencing selling pressure. In response, Spain called a snap election for November 29. The French government's 2027 budget targets a deficit of 5% of output, surpassing the EU's 3% cap by 2%.\n\nWhen long-term bond yields rise, governments and corporations face higher borrowing costs, prompting traders to assume the ECB will reduce its rate hikes. Money-market pricing, reflecting traders' expectations of the deposit rate after each ECB meeting, shows a gradual decrease in anticipated hikes. As of October 5, traders expect a 0.28 hike at the October 29 meeting, 0.89 by December 17, and an overall increase of 2.69 by September 2027.\n\nIf the market's expectations prove accurate, the ECB will have priced out all remaining rate hikes, contradicting its earlier forecasts. ECB President Christine Lagarde's September 28 statement to the European Parliament warned that higher long-term rates could slow growth and pass on energy costs to other sectors, exceeding ECB staff projections. ECB Chief Economist Andy Haldane echoed similar concerns on October 5.",
  "summary": "Traders have taken about one quarter-point hike out of their European Central Bank (ECB) forecasts since mid-September, betting the ECB will stop raising rates because of a French debt selloff.",
  "key_points": [],
  "editors_take": null,
  "illustration": null,
  "coverage": {
    "outlets": 1,
    "also_reported_by": []
  },
  "ai_generated": true,
  "disclaimer": "Summaries, key points and the editor’s take are written by software from other outlets’ reporting and may contain errors — always check the linked original."
}