"The European Central Bank has kept interest rates unchanged at 2%, prioritising stability as inflation remains only slightly above its target at 2.1% in August. The argument for caution has been further reinforced by political and economic volatility in the Eurozone's second largest economy, France. Unable to pass vital spending cuts through parliament, the Government is struggling in its fight against spiralling debt."
"Despite interest rates already near rock bottom, the debate within the Governing Council is unlikely to be settled. Some members have been arguing that maintaining higher rates for longer is the safest course, while others believe that easing could be justified if inflation continues to cool. Attention is now turning to the ECB's year-end meetings in October and December. Markets are now pricing in late 2025 or early 2026 as likely turning points."
"The European Central Bank will remain vigilant against any resurgence in inflation, but it must be ready to act if a disinflation trend becomes clearer. External factors remain critical, from volatile energy markets and wage negotiations to global trade tensions. For now, September's decision is less about dramatic change and more about buying time to judge whether inflation is truly on a sustainable path back to target."
The European Central Bank left its main interest rate at 2% as inflation stood slightly above target at 2.1% in August. Stronger-than-expected summer growth across the eurozone lowered the immediate need for monetary stimulus. Political and economic volatility in France, including failure to pass spending cuts and rising debt, reinforced a cautious stance. Governing Council members remain divided between maintaining higher rates longer and easing if inflation cools. Markets now expect a policy turning point in late 2025 or early 2026, with focus on October and December meetings. The ECB will monitor inflation, energy markets, wages and trade tensions and stand ready to act.
Read at London Business News | Londonlovesbusiness.com
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