Overview

• The Governing Council is expected to leave the deposit rate at 2% today and publish new projections that slightly trim 2026 growth and inflation.
• Christine Lagarde is likely to avoid firm guidance while keeping the option of a marginal further cut open, with markets pricing roughly 6–7 bps of easing by year‑end and about 17 bps by mid‑2026.
• France’s leadership shake‑up after François Bayrou’s failed confidence vote and Sébastien Lecornu’s appointment widened the OAT‑Bund spread to around 0.82 percentage points and briefly lifted French yields above Italy’s.
• Analysts widely judge the ECB’s Transmission Protection Instrument inappropriate for France at present given limited spillovers and fiscal concerns, though officials maintain discretion to use it if needed.
• Bank of America expects a slightly dovish press conference and flags a small downside risk for the euro, with overall FX effects likely to be muted.