The European Central Bank is set to keep borrowing costs steady as it weighs bond-market turmoil in France and a renewed advance in energy costs.

The deposit rate will be left at 2.5% on Thursday, according to all but one economist in a Bloomberg survey. Analysts predict a third and final hike in December, when new forecasts will offer a guide to consumer-price developments through 2028 amid further disruption to oil and gas supplies from the Iran war.

Despite inflation already being almost double the 2% target, the fact it remains largely confined to energy allows policymakers more leeway to consider their next move. The euro zone’s so far resilient economy, meanwhile, is losing momentum.

Officials have warned that the recent jump in sovereign-bond yields will hamper growth, albeit while also helping to restrain inflation. France, however, has experienced more acute market pressure due to its bloated budget deficit and unrest on the streets.

The plight of the currency bloc’s No. 2 member recalls the region’s debt crisis more than a decade ago, sparking speculation over whether the ECB will intervene or be less inclined to tighten monetary policy further. The central bank joins the Federal Reserve and, probably, the Bank of Japan in holding fire on rates this week.

President Christine Lagarde will face reporters on these issues and her own uncertain future at a press conference at 2:45 p.m. in Frankfurt, 30 minutes after the ECB’s policy announcement.

Some officials have already signaled that further action is likely as inflation approaches 4%. Skipping this week and hiking in December would maintain the quarterly pace of tightening and signal that policymakers aren’t panicking.

Lagarde and others have said they still see a “measured” adjustment as the optimal approach. But they’ve also stressed that the situation remains uncertain as the outlook for consumer prices hinges largely on developments in the Middle East.

What Bloomberg Economics Says:“The ECB will almost certainly pause at its meeting on Oct. 28-29. Higher borrowing costs are already tightening financial conditions and, with the turmoil in sovereign bond markets, policymakers will want to avoid adding fuel to the fire.” —David Powell and Simona Delle Chiaie. Read the full preview here.

“The market is pricing that we are going to have to do more,” Governing Council member Pierre Wunsch told Bloomberg Television this month. “It’s a base case that looks reasonable, but again, we are in a very uncertain world.”Rates are now at the upper end of a range that’s still considered to have a neutral impact on the economy. Lifting them meaningfully above that threshold would probably require evidence of second-round effects like elevated wage demands that would indicate inflation is becoming more stubborn.

Data has been relatively sparse since the last meeting, in September, and a fresh batch will only arrive on Friday when Eurostat issues a report on third-quarter economic growth and the four biggest economies release inflation figures for October.

Investors are watching for how Lagarde addresses the volatility gripping French bond markets, particularly given signs of spillover to other countries like Italy. The French 10-year yield spread over Germany recently soared to a 15-year high as the country grapples with a troubling budget shortfall, political fragmentation and social unrest.

The situation risks putting the ECB in a bind as its crisis-fighting tools aren’t meant to fix European Union members’ difficulties over excessive deficits. Officials have waved away suggestions they may have to deploy their so-called Transmission Protection Instrument, created in 2022 to allow unlimited bond-buying in case of unwarranted and disorderly market moves.

Another option is pausing quantitative tightening, under which the ECB has been rolling off bonds it bought in the low-inflation era. So far there’s been no indication that such a move would have the support of the Governing Council.

“The threshold for action is going to be very high,” Nannette Hechler-Fayd’Herbe, chief investment officer for EMEA at Lombard Odier, told Bloomberg TV. “I don’t expect the ECB to use instruments like the TPI, unless there is really this risk of contagion and disorderly functioning of financial markets or liquidity tightening up for the whole of the EU.”Rumors about Lagarde stepping away early from the ECB’s top job continue to swirl, particularly after she confirmed that she’s considering leaving “a few months” before her term ends next October.

Fellow rate-setters are growing impatient for her to clarify the situation, with the working assumption inside euro-zone circles increasingly focusing on an exit in January. That would mean an announcement would have to be made soon to allow enough time for a successor to be chosen by the bloc’s leaders.