Daily Financial Breakfast 29 October 2026: 3.75–4.00% Fed Rate Hold as ECB Says Lagarde Will Resign

3.75–4.00% Fed Hold: Today’s Key Market News

• 7 February 2027 is Christine Lagarde’s resignation date. The European Central Bank confirmed that its President will step down then.
• A 10–2 vote kept the Federal Reserve’s target rate at 3.75–4.00%; both dissenters backed a 25-basis-point increase.
• European natural gas prices have climbed roughly 40% this month, according to MUFG, which also reported a steep French government bond sell-off as euro-area financial conditions tightened.
• A 25-basis-point increase took the Bank of Canada’s overnight rate to 2.50%, accompanied by warnings of inflation risks from energy prices and cost pass-through.
• A narrow 4–3 vote left the Reserve Bank of New Zealand’s Official Cash Rate at 2.75%, although the bank indicated that tighter policy was likely to be needed.
• At 4.3%, Australia’s September headline inflation was up from August’s 4.0%; third-quarter trimmed mean inflation stood at 3.7%.
• Above $100 despite Thursday’s decline, WTI crude faced comments from U.S. and Iranian officials indicating efforts to de-escalate tensions.
• A broadly neutral GBP 1.3 billion impact was Deutsche Bank’s estimate for UK Finance Minister Healey’s Budget, which pledged fiscal discipline and protection for households against energy costs.

Market Moves at a Glance

0.37% Rise in Dow Jones Futures Contrasts With Tech Losses

Dow Jones futures gained 0.37% to near 52,890 in Thursday’s European session. By contrast, S&P 500 futures lost 0.38% to around 7,750, while Nasdaq 100 futures dropped 1.2% to near 29,620.

102.30 Dollar Index; EUR/USD Below 1.1150

Following modest declines on Wednesday, the U.S. Dollar Index hovered near 102.30 in European trading. Having traded around 1.1140 in Asia, EUR/USD stayed below 1.1150 in Europe and close to its weakest level since May 2025. Sterling slipped towards $1.3312, whereas USD/JPY held almost unchanged around 157.80. Around 1.5580, EUR/CAD continued the losing run that started on 16 October.

$4,050 Gives Way as Gold’s Advance Stalls

Early Asian trading on Thursday saw gold retreat to around $4,050 and subsequently fall below that level. The decline broke a three-day rise that had taken the metal to a weekly high on Wednesday. Weakness persisted in later trading.

$80,000 Break Leaves Bitcoin With Most Weekly Gains Erased

After the Federal Reserve kept interest rates unchanged, Bitcoin dropped below $80,000 on Thursday. The decline wiped out most of the cryptocurrency’s gains for the week.

Central Bank Decisions & Inflation Trends

7 February 2027: ECB Confirms Lagarde’s Resignation Date

In an announcement on Thursday, the ECB said European Central Bank President Christine Lagarde had notified the Governing Council of her intention to resign on 7 February 2027.

3.75–4.00% Fed Hold Draws Dissent From Cook and Hammack

Wednesday’s Federal Reserve decision left the federal funds target range at 3.75–4.00%, with the vote split 10–2. The dissenting votes came from Governor Lisa D. Cook and Cleveland Fed President Beth M. Hammack, who supported a 25-basis-point increase.

Economic activity was growing at a “strong pace”, the policy statement said, citing “strong” productivity growth and “robust” capital investment as support. Gathering further information, it added, would help the committee identify the policy stance needed to bring inflation back to target in a timely manner.

With inflation still too high, Chair Kevin Warsh emphasised preventing relative price changes in specific sectors from spreading through the economy. Even so, he said inflation expectations and inflation compensation were heading in the right direction. Without confirming a December increase, he said: “Quashing inflation is not about some fixed individual date on a calendar,”

Although Warsh recognised that financial conditions had tightened, he said he was “unwilling and unable to call them tight”. The two-year Treasury yield was still around 9 basis points below its pre-announcement level, MUFG reported. Brown Brothers Harriman put the market-implied probability of a December rate increase at 83%.

According to Commerzbank, Warsh also outlined a revised Fed meeting structure. Eight meetings a year will remain on the calendar. In 2027, however, one will focus on strategy and produce neither a rate decision nor a statement. That format will apply to two meetings in 2028, reducing the number of rate decisions that year to six.

40% Gas Price Rise Adds to French Bond Sell-Off Pressures

Euro-area financial conditions have tightened following a steep sell-off in French government bonds, with higher energy prices adding inflationary pressure. European natural gas prices were at new year-to-date highs after climbing around 40% this month, said MUFG’s Lee Hardman.

Pointing to September inflation of 3.8%, Hardman said higher sovereign yields, especially in France, had created unwanted tightening and made monetary policy decisions more difficult. As expectations of rate increases receded, Germany’s two-year government bond yield had dropped around 25 basis points from last month’s highs, he added.

The yield gap between French and German government bonds had widened again, Commerzbank’s Antje Praefcke observed. ECB officials, she said, had described France’s debt problem as chiefly an issue for the French government to address.

2.50% Overnight Rate After Bank of Canada’s 25-Basis-Point Increase

Wednesday brought a 25-basis-point increase in the Bank of Canada’s overnight rate to 2.50%. Further tightening remained an option as the bank cautioned that persistently high energy prices and greater cost pass-through could sustain elevated inflation.

Despite the widely expected decision, the Canadian dollar initially found little support, leaving USD/CAD largely unchanged in Wednesday’s American session. Early Asian trading on Thursday brought a stronger Canadian dollar and a fall in USD/CAD to near 1.3975. With the Fed holding steady, Canada’s increase reduced the policy-rate differential between the two central banks by a quarter of a percentage point.

2.75% RBNZ Hold: 4–3 Vote Leaves Tightening Signal Intact

Markets had widely expected a 25-basis-point increase to 3.00%. Instead, a narrow 4–3 vote kept the Reserve Bank of New Zealand’s Official Cash Rate at 2.75%. During Wednesday’s trading, NZD/USD declined 0.98% to around 0.5625.

While signalling that tighter monetary policy was likely to be necessary, the central bank said the economic outlook would determine its timing and scale. Its forecast put December-quarter headline inflation at 4.4% year on year, largely because of higher global fuel prices and the New Zealand dollar’s depreciation since the September policy meeting.

4.3% Australian Inflation Lifts Rate-Increase Expectations

At 4.3% year on year, Australia’s September headline consumer price inflation exceeded the 4.2% consensus and August’s 4.0%, according to Brown Brothers Harriman’s Elias Haddad. Higher housing and transport costs helped drive the acceleration.

In line with consensus, September trimmed mean inflation increased from 3.5% to 3.6%. The third-quarter trimmed mean measure, which is relevant to policy, was 3.7%, exceeding both the 3.6% consensus and the second quarter’s 3.6%. Headline and underlying inflation also exceeded the RBA’s August year-end forecasts of 3.6% and 3.3%, respectively.

Cash-rate futures moved the implied probability of a 25-basis-point increase to 4.85% up from 60% to 85%, Haddad said. Following a 0.40% rise to 0.7053 on Wednesday, AUD/USD was near 0.7055 in Thursday’s Asian session.

Energy Markets & Geopolitical Developments

$100 Holds for WTI Despite Retreat on Iran De-Escalation Efforts

Comments from U.S. and Iranian officials signalling efforts to ease tensions accompanied a modest decline in WTI crude on Thursday, though prices stayed above $100. Earlier in the session, renewed worries over Middle East energy-supply disruptions had provided support, with WTI around $101.20 in Asia.

After two days of declines, oil recovered on Wednesday. WTI was near $102.00 after the Fed announcement, below the session high just under $103.00 reached before the decision. Meanwhile, Iran was considering a Qatari draft deal to end the war; a response was expected before the weekend.

Government Policy & Public Finances

GBP 1.3 Billion Budget Impact: Healey Balances Investment, Energy Relief and Fiscal Discipline

Presenting the annual Budget to Parliament on Wednesday, UK Finance Minister Healey promised to maintain fiscal discipline and shield households from rising energy costs associated with the war in Iran. Investment increased under the package, while tax increases were limited.

A broadly neutral GBP 1.3 billion effect on the public finances was the assessment of Deutsche Bank chief UK economist Sanjay Raja. Policy measures were forecast to cut borrowing by around GBP 10 billion by the end of the forecast horizon, he said. The tax burden nevertheless remained on track for new post-war highs.

Raja outlined borrowing of 4.2% of GDP this fiscal year, easing to 3.4% before eventually reaching 1.8% by 2031/32. Compared with the Spring Statement projections, the medium-term trajectory was nearly 0.2 percentage points higher. Deutsche Bank put the fiscal gap to be addressed in the new year at roughly GBP 25–40 billion and questioned why the planned consolidation was backloaded.

Key Dates on the Economic Calendar

• September U.S. PCE Inflation Release (29 October 2026, 8:30 a.m. New York): The September Personal Consumption Expenditures inflation report is due; expectations cited by DBS put headline inflation at 3.6% year on year and 0.5% month on month.
• Third-Quarter U.S. GDP: Advance Estimate (29 October 2026, 8:30 a.m. New York): The initial July–September GDP estimate is due from the Bureau of Economic Analysis. Analysts expected annualised growth of 3.2%, against 2.2% in the second quarter.
• ECB Policy Decision Announcement (29 October 2026, 13:15 GMT): At the close of its two-day meeting, the European Central Bank is due to announce its monetary policy decision.
• Bank of Japan Policy Decision Release (30 October 2026): Friday is the scheduled date for the Bank of Japan’s monetary policy decision.
• Tokyo CPI Inflation Release: Alongside the Bank of Japan policy announcement, the calendar includes the forthcoming Tokyo consumer price inflation report.
• RBA Cash Rate Announcement (3 November 2026): September and third-quarter inflation data precede the Reserve Bank of Australia’s next cash rate decision.
• RBNZ December Policy Meeting (9 December 2026): The Reserve Bank of New Zealand’s next December policy meeting comes after its October decision to keep the Official Cash Rate unchanged.