The European Central Bank used its Economic Bulletin, published on Thursday, to document how much tightening has already reached euro area borrowers since the Governing Council last raised rates. Financial conditions have tightened since the Council’s September 10 meeting, the bulletin said: interest rates have broadly moved up while stock prices have fallen.
The credit detail is the new material. In August the cost of market-based debt for firms rose to 4.1 percent, from 4.0 percent in July, while bank lending rates for firms held at 3.8 percent. Mortgage rates rose to 3.6 percent in August, from 3.5 percent in July. Bank lending to firms grew at an annual 4.2 percent in August and September, down from 4.4 percent in July, while corporate bond issuance grew 4.2 percent in September. In the October bank lending survey, banks tightened credit standards for loans to firms in the third quarter, citing concern about the economic risks their customers face, and corporate loan demand declined despite higher financing needs for inventories and working capital, which the bulletin attributes in particular to higher interest rates. Mortgage lending growth edged down to 3.0 percent in September, credit standards for mortgages were unchanged, and mortgage demand declined substantially.
The bulletin restates the stance set on October 29, when the Council held the deposit facility at 2.50 percent, main refinancing operations at 2.65 percent and the marginal lending facility at 2.90 percent, and committed to a data-dependent, meeting-by-meeting approach with no pre-committed path. Its inflation record shows why December is contested: euro area inflation rose to 3.8 percent in September from 3.2 percent in August, with energy inflation at 18.9 percent, inflation excluding energy at 2.3 percent, and services inflation at 3.2 percent. The Bank judges that energy prices have risen beyond the path in its September projections, which is likely to keep headline inflation well above target over the coming quarters, while underlying inflation has remained broadly stable and wage pressures moderate, with compensation per employee growing 3.3 percent in the second quarter and the wage tracker pointing to negotiated growth of 2.5 to 2.8 percent in the rest of 2026.
That combination is the December argument in full. Officials including Lane and Kazaks argued this week for an increase on energy pass-through risk; the bulletin’s own evidence says transmission is already tightening through the channels a rate rise would use, and that second-round wage effects have not appeared. Both sides will cite the same document on December 16 to 17.