Europe’s Central Bank Keeps Traders Guessing as Inflation Stays Above Target
The European Central Bank is entering the final stretch of 2025 with a clear message: monetary policy is on pause, not on a path toward immediate easing.
At an event in Madrid, José Luis Escrivá, governor of the Bank of Spain and member of the ECB’s Governing Council, said policymakers see little reason to rush into additional rate cuts. Speaking at the Bloomberg Future of Finance conference, he emphasized that decisions will continue to be made “one meeting at a time” – and that either direction remains possible.
“We are not in a cycle of automatic cuts,” Escrivá said. “Optionality means exactly that – the door remains open in both directions.”
Holding the Line
The ECB is widely expected to keep rates unchanged at its October 30 meeting, following its quarter-point reduction in September. While some market watchers have speculated that policymakers could ease further if growth stalls, Escrivá dismissed the notion that the central bank is leaning that way.
Other council members have voiced similarly cautious tones. Chief Economist Philip Lane described the choice as one between staying put or trimming rates slightly if inflation softens, while François Villeroy de Galhau of France said further easing can’t be ruled out entirely. Olli Rehn, Finland’s central bank chief, added that the overall environment “remains comfortable,” though downside risks to inflation persist.
Escrivá, however, pointed out that most market participants expect no major policy moves in the near term. “The consensus view is stability,” he said, “and that aligns with our own assessment of the data.”
Inflation Near Target, Growth Still Tepid
Price growth across the eurozone is running close to the ECB’s 2% target, though the latest figure – 2.2% in September – marks a five-month high. Spain recorded the highest rate among major economies at 3%, driven mainly by energy costs and other volatile components.
“These are short-term fluctuations,” Escrivá said. “What matters for us is the medium-term trend, and that continues to point toward inflation stabilizing around target.”
The broader economy, however, remains fragile. Growth in the second quarter slowed to just 0.1%, as U.S. tariffs imposed under President Donald Trump and a soft global trade backdrop pressured European exports. Economists expect similarly weak performance for the third quarter before a mild recovery late in the year.
No “Insurance” Cut in Sight
Asked whether the ECB might mirror the U.S. Federal Reserve’s “insurance cut” strategy from previous years, Escrivá said there’s no justification for such preemptive action.
“Central banks act early only when the threat is significant and likely to materialize,” he explained. “That’s not where we are today.”
Despite external challenges, he argued that the eurozone’s monetary position is “balanced” and does not warrant immediate intervention.
With inflation stabilizing and the economy treading water, Escrivá’s comments signal a period of watchful patience for the ECB – a stance that leaves both hawks and doves waiting for clearer data before the next move.
Source: Bloomberg
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