ECB keeps rates unchanged; euro and bond yields fall
TLT•The European Central Bank kept interest rates unchanged and cited rising inflation risks from energy costs. The euro fell 0.2% to around $1.113, two-year government bond yields fell sharply and the STOXX 600 rose 0.95%.
1. Rates held steady
The European Central Bank left interest rates unchanged on Thursday, a widely expected decision, and said rising energy costs were increasing inflation risks. The statement could reinforce market bets on a December rate hike, although tighter financing conditions may weigh on inflation and growth.
2. Markets react
The euro fell to its lowest level since last May, trading 0.2% lower at around $1.113. Rate-sensitive two-year government bond yields fell sharply, while the STOXX 600 was up 0.95%.
3. Leadership uncertainty
Christine Lagarde resigned earlier on Thursday, with market commentators saying her departure adds uncertainty but is not expected to change the near-term rate outlook. Investors will watch the succession as pressure on French government debt persists.
