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ECB comfortable with rates; sees only temporary inflation undershoot, VP says
Published by Global Banking and Finance Review
Posted on November 6, 2025
2 min readLast updated: January 21, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on November 6, 2025
2 min readLast updated: January 21, 2026
The ECB is comfortable with current interest rates, viewing any inflation dip below 2% as temporary, according to VP Luis de Guindos.
FRANKFURT (Reuters) -The European Central Bank is comfortable with the current level of interest rates and considers any inflation dip below 2% to be temporary, Luis de Guindos, the bank's Vice President said on Thursday.
Inflation, hovering just above the ECB's 2% target for most of this year, is projected to dip below that level next year and some policymakers fear this could shift inflation expectations, entrenching ultra-low levels, much like in the pre-pandemic decade.
"If (undershooting) happens, it will be something that is going to be temporary," de Guindos told a Natixis CIB webinar. "We can be comfortable with the present level interest rates," he said.
"I think that convergence to 2% without any overshooting or undershooting is now the main baseline scenario for projections," de Guindos added.
Financial investors mostly agree but still price in a modest chance of further policy easing to prevent inflation from slipping too far from its target. While the chance of a rate cut in December is seen as close to zero, investors still see a 40% chance of a cut by mid-2026.
De Guindos said that recent inflation news has been positive and the slowdown in services price growth, a stubbornly high component of the price basket, also increased the ECB's confidence in projections.
Another component of the ECB's comfort in the inflation path comes from solid growth readings in recent weeks. While figures are not spectacular, they indicate that the 20-nation bloc continues to expand at a rate of 1% or just above, broadly in line with its potential.
De Guindos said that policymakers were now "marginally" more optimistic on growth and saw the bloc on track to meet the ECB's forecasts.
(Reporting by Balazs Koranyi; Editing by Alex Richardson and Tomasz Janowski)
Monetary policy refers to the actions taken by a central bank to manage the money supply and interest rates to achieve macroeconomic objectives such as controlling inflation, consumption, growth, and liquidity.
The European Central Bank (ECB) is the central bank for the euro and is responsible for monetary policy within the Eurozone, aiming to maintain price stability and oversee the financial system.
Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage of the principal amount. They are influenced by monetary policy and economic conditions.
Inflation is the rate at which the general level of prices for goods and services rises, leading to a decrease in purchasing power. It is typically measured by the Consumer Price Index (CPI).
A central bank is a national institution that manages a state's currency, money supply, and interest rates. It oversees the banking system and implements monetary policy.
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