The European Central Bank (ECB) announced on October 30, 2025, that it will keep its three key interest rates unchanged. President Christine Lagarde and Vice-President Luis de Guindos addressed the decision at a press conference in Florence, noting that inflation remains close to the ECB’s two percent medium-term target and that their outlook for inflation has not changed significantly.
Lagarde expressed appreciation for the hospitality of Governor Panetta and his staff during the Governing Council meeting. She stated, “We are determined to ensure that inflation stabilises at our two per cent target in the medium term. We will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance. In particular, our interest rate decisions will be based on our assessment of the inflation outlook and the risks surrounding it, in light of the incoming economic and financial data, as well as the dynamics of underlying inflation and the strength of monetary policy transmission. We are not pre-committing to a particular rate path.”
According to Eurostat’s preliminary flash estimate released on October 30, euro area GDP grew by 0.2 percent in the third quarter of 2025. The services sector expanded due to strong tourism and growth in digital services, while manufacturing faced challenges from higher tariffs and a stronger euro. Surveys indicate firms have increased efforts to modernize IT infrastructure and integrate artificial intelligence.
Unemployment was reported at 6.3 percent in September, near historical lows despite cooling labor demand. Households continue saving a large portion of income, which could support further consumer spending. Government spending on infrastructure and defense is expected to support investment.
However, external factors remain a concern for growth. Goods exports declined between March and August following earlier trade frontloading before tariff increases. New export orders suggest further declines may occur.
The ECB Governing Council emphasized strengthening the euro area economy amid geopolitical tensions and welcomed EU leaders’ commitment to this goal at last week’s Euro Summit. The council highlighted the importance of implementing structural reforms, boosting productivity, completing capital market integration projects such as banking union, and advancing regulation for a digital euro.
Lagarde announced: “The Governing Council is committed to making retail and wholesale central bank money fit for the digital age. In this vein, the Governing Council today decided to move to the next stage of the digital euro project. This will ensure technical readiness for potential issuance and support Europe’s digital sovereignty once the legislation has been adopted.”
Annual inflation rose slightly from 2.0 percent in August to 2.2 percent in September due mainly to slower declines in energy prices; food price inflation eased somewhat while core inflation excluding energy and food edged up.
Lagarde explained that indicators point toward continued alignment with their two percent target: “While firms’ profits are recovering, labour costs are set to moderate further owing to rising productivity and an easing in wage growth.” Forward-looking measures such as wage trackers suggest wage growth will slow through early 2026.
Recent international developments—including an EU-US trade deal over summer, a Middle East ceasefire announcement, and progress in US-China trade talks—have reduced some downside risks but global volatility persists.
The ECB noted that “the still volatile global trade environment could disrupt supply chains,” impacting exports as well as consumption and investment across Europe. Geopolitical tensions remain high due primarily to Russia’s war against Ukraine.
Financial conditions have remained broadly stable since the previous meeting; lending rates for businesses averaged 3.5 percent in August with little change reported in mortgage rates or credit standards through September.
Growth rates for both bank lending (2.9 percent annually) and broad money supply (M3) slowed slightly compared with earlier months.
