Once again ECB leaves rates unchanged: “Outlook remains uncertain”

Brussels – The economic situation and performance are encouraging overall, but not enough to justify an interest rate cut. That is why the  Board of the European Central Bank, meeting in Florence, prefers caution and opts to continue the pause, leaving borrowing costs unchanged, as already done in July and then in September. The interest rate on deposits with the central bank thus remains at 2 per cent, the rate on the main refinancing operations remains at 2.15 per cent, and the rate on the marginal lending operations is confirmed at 2.40 per cent. 

“Inflation remains close to our mid-term target of 2 per cent, and our assessment of the inflation outlook remains broadly unchanged,” said ECB President Christine Lagarde, only partially heartened by the available data: Eurozone growth “is still weak, but better than expected,” she admits, referring to the shy +0.2 per cent last quarter. “The economy has continued to grow despite the difficult global environment; however, the outlook is still uncertain, in particular due to ongoing global trade disputes and geopolitical tensions.” Because, she explains, certainly the ceasefire between Israel and Gaza and the agreement on tariffs between the EU and the US “have mitigated some of the downside risks to economic growth.” At the same time, however, the real impact of the US tariffs on exports and manufacturing investment “can only be quantified as time goes on,” the war between Russia and Ukraine continues with all the uncertainties that this entails, and Sino-European tensions is not helping.

https://www.eunews.it/en/2025/01/14/ifo-more-interest-rate-cuts-unlikely-in-2025/ 

In a nutshell, “the still volatile global trade environment could disrupt supply chains, further dampen exports and weigh on consumption and investment.” Confidence also plays a role here, Lagarde warns: “a deterioration in sentiment in financial markets could lead to tighter financing conditions.” 

Given the situation, it is necessary to make things right. In the opinion of the Eurotower’s number one, “strong private sector balance sheets and our past interest rate cuts remain important sources of resilience,” to which must be added the missing, all-public and exquisitely governmental component. Here, then, is the call for reforms: “Governments should prioritise structural reforms and growth-enhancing strategic investments, while ensuring the sustainability of public finances,” insists Lagarde, with what is a mantra of recent years, which is valid not only but especially for Italy.

 There is not only homework. The ECB’s to-do list also includes the EU agenda to be pursued. “It is crucial to promptly implement the European Commission’s competitiveness plan,” continues Lagarde, who urges the 27 to “promote further capital market integration by completing the savings and investment union and the banking union in an ambitious timeframe.”