European Central Bank officials are preparing to finish 2026 with a third interest-rate increase, the last before an increasingly complex backdrop overshadows decisions next year.

By Jana Randow and Alexander Weber While policymakers speaking this week in Bangkok kept open the option of acting in October, they pointed to December as the more likely timing for a hike that’s also widely anticipated among traders and economists.

But the discussions also revealed growing unease over issues including rising bond yields, high energy costs and the blistering investment boom in artificial intelligence.

“The tradeoffs for monetary policy are going to get more tricky,” Governing Council member Martins Kazaks said in an interview. “So far, the decisions have been relatively easy. But there’s a lot of uncertainty and very low visibility.”The gathering in the Thai capital was dominated by warnings that the economy’s surprising resilience to the Middle East conflict will come under increasing strain. The euro zone, where investors have pushed up France’s borrowing costs due to its gaping budget deficit and political gridlock, was a focal point.

US midterm elections and an unpredictable response from President Donald Trump are adding to the uncertainty.

Policymakers signaled a preference for sticking with a quarterly pace of rate increases, suggesting continuity after being the first major central bank to hike rates since the war broke out. That would mean waiting until the Dec. 17 gathering, when they’ll have new economic forecasts.

“From a policymaker’s perspective, you want to take decisions when you have the largest amount of data available, and the next such meeting is December,” Governing Council member Gediminas Simkus said in a separate interview. “But you also can’t ignore the fact that we have a meeting in October.”On the bright side, the Lithuanian and his colleagues pointed out that inflation heading toward 4% — double the ECB’s target — hasn’t yet spread widely. At the same time, there are no signs that energy-driven price pressures are letting up.

On Friday, Brent oil hit $110 a barrel for the first time since May after Iran-backed Houthi rebels pummeled Saudi Arabia with missile and drone strikes, and Russia and Ukraine exchanged tit-for-tat attacks on energy infrastructure.

With wage negotiations looming next spring, the ECB is carefully analyzing how such shocks are “traveling through the economy,” President Christine Lagarde told CNN. “We are not seeing any of that yet, but we have to be extremely careful that little signs, indices of such secondary effects are visible.”

Officials are already pondering how restrictive monetary policy needs to become. The last two hikes, in June and September, took the deposit rate to the upper end of the range the ECB previously identified as neutral.

Additional moves — traders are betting on three by September next year — would start to damp economic activity just as a long-awaited recovery is taking hold.

“The market is pricing that we are going to have to do more,” Governing Council member Pierre Wunsch told Bloomberg TV. “It’s a base case that looks reasonable, but again, we are in a very uncertain world.”Some of that uncertainty is originating in Europe, with French finances in the spotlight after a bond-market selloff stoked memories of the sovereign-debt crisis that shook the region through much of the 2010s.

Many participants in Bangkok, including IMF chief Kristalina Georgieva, argued that large budget deficits and debts must urgently be addressed, calling advanced economies the “worst offenders.”

While some ECB officials signaled optimism that the message investors sent to France has resonated with the government as it prepares key budget votes, others are already focused on how to respond if the situation deteriorates.

“The toolbox allows for quite a lot of instruments,” said Governing Council member Martin Kocher. “We are not at the stage where we need to discuss any of these instruments. But they are there if they are needed.”

The ECB’s work is overshadowed by increasing frustration among officials about Lagarde’s refusal to offer clarity on a possible early exit, according to people familiar with the matter.

The institution is in the midst of a major leadership overhaul, with Executive Board member Isabel Schnabel leaving in January, Chief Economist Philip Lane’s term expiring in May and Lagarde’s technically running through October 2027. Vice President Boris Vujcic joined in June.