(Oct 30): The European Central Bank left interest rates unchanged for a third meeting, with inflation in check and the economy continuing to grow.
The deposit rate was kept at 2% on Thursday — as predicted by all analysts in a Bloomberg survey. Policymakers continued to offer no guidance on future steps, stressing that they’ll act one meeting at a time based on incoming data.
“The robust labour market, solid private sector balance sheets and the Governing Council’s past interest-rate cuts remain important sources of resilience,” the ECB said in a statement. “However, the outlook is still uncertain, owing particularly to ongoing global trade disputes and geopolitical tensions.”
The decision did little to move markets. The euro held onto earlier losses, trading down 0.4% at US$1.1554, while two-year German yields remained three basis points higher at about 2%. Swap markets continue to suggest the ECB’s campaign of cuts is likely over.
Officials have been vocal of late in signalling that there’s little reason to add to the eight reductions in borrowing costs they’ve made to date. Their confidence stems from inflation that’s been hovering around the 2% goal for months and indications that the economic damage from Donald Trump’s trade measures has been relatively contained.
That stance contrasts with that of the Federal Reserve, which lowered US rates for a second meeting on Wednesday, citing slowing jobs gains.
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President Christine Lagarde will elaborate on the ECB’s decision at a 2:45pm press conference in Florence, Italy — this year’s choice for the one annual meeting held away from the institution’s Frankfurt home.
The announcement comes on a busy day of economic news, with data earlier showing gross domestic product in the 20-nation eurozone rose more than expected in the third quarter. France was the main driver, recording its strongest three months since 2023, while Germany and Italy stagnated, narrowly avoiding recessions.
October inflation numbers for the currency bloc are due Friday, with analysts expecting a dip to 2.1%.
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The updates are broadly in line with the ECB’s latest quarterly outlook, which envisages medium-term inflation staying close to target after an undershoot next year, and growth picking up on private consumption and governments’ defense and infrastructure outlays.
Surveys of purchasing managers last week backed that view. The euro area’s headline index of business activity unexpectedly hit its highest level since 2024, while an indicator of German business confidence also advanced.
Policymakers offer varying assessments on the region’s outlook. Some see more downside risks to inflation due to this year’s strength in the euro, persistent trade uncertainty and the need for France to bring down its budget deficit.
Others have taken the opposite view. Irish central-bank chief Gabriel Makhlouf reckons upside dangers to prices are more prominent — specifically food costs. There’s also little agreement about possible knock-on effects from US-China trade tensions, even as they showed signs of calming.
A more in-depth discussion about such issues is expected in December, when the ECB will publish fresh economic forecasts that will extend into 2028.
Uploaded by Magessan Varatharaja
