The European Central Bank has left interest rates unchanged, as expected, but has not provided indications on its next move, even if investors suggest that greater support will be necessary, given that the inflation will drop below the objective next year. The ECB has halved its reference rate until June, but since then it has maintained it at 2%, stating that the economy of the 20 Eurozone countries is in a “good position”, even if a further loosening cannot be excluded. Recent data have confirmed this optimistic vision, giving political managers the time to understand how the US duties, the increase in German public spending, the cuts in the rates of the Federal Reserve and the political turbulence in France could affect growth and inflation.
“We continue to be in a good position,” said the president of the ECB Christine Lagarde at the press conference, adding that inflation is “where we want it to be”, the internal economy is solid and the uncertainty about global trade has mitigated after a series of tariff agreements with the United States. “But we are not on a pre -established path,” he added, reiterating the bank’s mantra according to which his decisions will remain dependent on the incoming economic data and underlining that today’s decision was made unanimously. “I am neither a hawk nor a dove but a owl because like the owls I want to look around me 360 degrees to make the best decisions”, highlighted the number one of the ECB, reiterating that each decision will be taken “Meeting by Meeting”.
“The risks for economic growth have become more balanced – said Lagarde – although the recent commercial agreements have reduced the uncertainty, the raising of commercial relations could further curb exports and compress investments and consumption. Geopolitical tensions, such as the unjustified war of Russia against Ukraine and the tragic conflict in the Middle East, remain among the main sources of uncertainty “. On the other hand, “an increase in defense and infrastructure expenditure higher than expectations, together with reforms aimed at supporting productivity, would make a contribution to growth”.
Then, if an intervention on spreads should be necessary. «We always monitor the market trend. Our goal is, as you know, price stability, but we need financial stability. And this requires a well -functioning monetary transmission mechanism: we believe we have all the necessary tools if this transmission does not prove efficient, “he explained. The TPI (Transmission Protection Instrument), the tool created by the ECB in 2022 to contrast speculation attacks against European government bonds, “has not been discussed in the least in our meeting”, he concluded.
The new projections of the ECB experts trace a picture of inflation similar to that of the forecast of June. It emerges that the total inflation would be placed on average to 2.1% in 2025, 1.7% in 2026 and 1.9% in 2027; Inflation net of the energy and food component would take a average of 2.4% in 2025, to 1.9% in 2026 and 1.8% in 2027. The economy should grow by 1.2% in 2025, with a raised correction compared to the 0.9% expected in June. The growth scheduled for 2026 is now slightly lower, at 1.0%, while for 2027 it remains unchanged, at 1.3%.