Recently, the Governing Council of the European Central Bank (ECB) released its latest monetary policy decision, focusing on maintaining the stability of the three key interest rates and clarifying the tapering path of the asset purchase program, demonstrating its policy stance of “data dependence and flexible adaptation”. Currently, euro zone inflation is approaching the 2% medium-term target, and the economy shows the characteristics of “short-term pressure and long-term resilience”. The stability of monetary policy provides clear expectations for the euro zone’s economic recovery.
According to the decision, all three key interest rates of the European Central Bank remain unchanged: the deposit facility rate is maintained at 2.00%, the main refinancing operations rate is stabilized at 2.15%, and the marginal lending facility rate is kept at 2.40%. The core basis for this decision is that the current level and outlook of euro zone inflation are “basically in line with the medium-term target orientation”, and there is no need to intervene in market supply and demand through interest rate adjustments. Overall, price operations show a “mild and controllable” trend.
Inflation data shows that the overall euro zone inflation rate rose slightly to 2.1% in August, and core inflation (excluding energy and food) stabilized at 2.3%. The narrowing decline in energy prices and the moderate decline in food prices offset each other, with service and goods inflation stabilizing at 3.1% and 0.8% respectively. The European Central Bank’s forecast for inflation in 2025-2027 shows that overall inflation will reach 2.1%, 1.7% and 1.9% respectively, and core inflation will be 2.4%, 1.9% and 1.8% respectively, all fluctuating around the 2% target. The slowdown in wage growth has become a key positive signal to curb inflation.
In terms of risk assessment, the European Central Bank believes that the risks to euro zone economic growth have now become balanced: downside risks mainly come from deteriorating trade relations, fluctuations in financial market sentiment and geopolitical tensions; upside risks include higher-than-expected defense and infrastructure spending, the implementation of productivity reforms and improved corporate confidence. ECB President Christine Lagarde said that the Governing Council will “stand ready to adjust all policy instruments” to ensure that inflation stabilizes at the 2% target in the medium term and maintain the smooth transmission of monetary policy.
