Highlights
The September 2025 ECB meeting reflected a cautiously confident outlook for the euro area economy. Policymakers agreed that interest rates were now in a good place, signalling the likely end of the current easing cycle. Market consensus supported this stance, with investors pricing out further rate cuts for 2025. While the euro area maintained steady growth expectations and inflation near the 2 percent target, the United States faced a weaker outlook, prompting expectations of faster rate reductions there. This convergence narrowed transatlantic policy differentials to their lowest level since 2024.
Inflation dynamics remained stable, driven by moderating wage growth, easing energy prices, and currency appreciation. Domestic demand continued to support growth, underpinned by a resilient labour market, falling savings rates, and recovering investment. Fiscal policy was shifting towards moderate loosening, particularly in Germany, to stimulate output.
Financial conditions showed optimism as bond yields stabilised, volatility declined, and foreign inflows into euro assets rose. Yet, the committee warned of inflated asset valuations and potential correction risks if sentiment soured.
Overall, the Governing Council opted to hold rates steady, balancing inflation control with growth support, and reaffirming its meeting-by-meeting data-driven approach amid a fragile yet improving global environment.
Inflation dynamics remained stable, driven by moderating wage growth, easing energy prices, and currency appreciation. Domestic demand continued to support growth, underpinned by a resilient labour market, falling savings rates, and recovering investment. Fiscal policy was shifting towards moderate loosening, particularly in Germany, to stimulate output.
Financial conditions showed optimism as bond yields stabilised, volatility declined, and foreign inflows into euro assets rose. Yet, the committee warned of inflated asset valuations and potential correction risks if sentiment soured.
Overall, the Governing Council opted to hold rates steady, balancing inflation control with growth support, and reaffirming its meeting-by-meeting data-driven approach amid a fragile yet improving global environment.
Definition
The European Central Bank (ECB) meets about every six weeks to determine the appropriate stance of monetary policy. The precise details of the policy deliberations are kept secret for thirty years but, since the 22nd January 2015 meeting, summary version of the minutes have been made available around four weeks after the discussions have taken place.
Description
The minutes provide a key insight into what the ECB is focusing upon when setting policy. As such they potentially can have a sizeable impact upon investor sentiment; especially at times when speculation is rife about a possible near-term change in official interest rates and/or non-conventional monetary policy instruments.
