ECB set to raise rates this Thursday: a catastrophe for France?

The European Central Bank (ECB) is highly likely to raise its key interest rates this Thursday, September 10. While the move is already largely priced in by the markets, it comes at the worst possible time for France as its debt spirals and borrowing costs hit levels not seen since 2008. The article ECB set to raise rates this Thursday: a catastrophe for France? appeared first on Cryptoast.

The European Central Bank is preparing to take a new step in its monetary tightening policy at its upcoming meeting in Wannsee. A near-unanimous consensus among economists predicts a 25-basis-point hike in key interest rates. This decision, driven by persistent inflation reaching 3.3% within the eurozone, would bring the deposit rate to 2.50%. While this move aims to curb the price surge, particularly fueled by the energy sector, it comes amid a macroeconomic climate marked by significant uncertainty.

For France, this monetary tightening arrives at a particularly critical moment. With an annual financing requirement of €310 billion, the French state must deal with 30-year borrowing costs reaching levels not seen since 2008. Market mistrust is also reflected in a widening of the "OAT-Bund spread"—the yield gap between French and German debt—signaling a rising risk premium. Projections are alarming: the debt service burden could rise from €38 billion in 2022 to between €70 and €90 billion by 2030, sustainably weakening public finances.

Beyond government circles, the daily lives of French households are directly impacted by this tightening. Mortgage rates, already climbing, are expected to cross the 3.7% to 4% mark for 20-year loans by the end of the year. Meanwhile, although the yield on the Livret A has been slightly adjusted upward to 1.70%, it remains well below the anticipated inflation for 2026, maintaining a negative real yield for savers. This setup reduces purchasing power while driving up the cost of consumer credit and business financing.

Investors' attention is now turning to Christine Lagarde's speech to find clues about the longevity of this rate hike cycle. The major challenge lies in the potential synchronization with the US Federal Reserve. As markets already price in a high probability of tightening across the Atlantic, joint action by the two major central banks could weigh heavily on risk assets, including the cryptocurrency market. While an isolated ECB hike seems already priced in, a global and prolonged monetary tightening represents the true systemic risk for the months ahead.