Finance
ECB policymakers prepare for December showdown on inflation, rates
Published by Global Banking and Finance Review
Posted on October 31, 2025
Editorial & Advertiser disclosure
Global Banking and Finance Review is an online platform offering news, analysis, and opinion on the latest trends, developments, and innovations in the banking and finance industry worldwide. The platform covers a diverse range of topics, including banking, insurance, investment, wealth management, fintech, and regulatory issues. The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website.
FLORENCE, Italy/FRANKFURT (Reuters) -European Central Bank policymakers are preparing for something of a showdown at their next meeting in December, when new three-year projections will shed light on whether or not they risk undershooting their target, four sources told Reuters.
The European Central Bank kept interest rates unchanged at 2% for the third meeting in a row on Thursday and repeated that policy was in a "good place" as economic risks recede and the euro zone shows resilience in the face of uncertainty.
Policymakers were generally sanguine about economic growth but views differed when it came to inflation, which the euro zone's central bank expects to slip below its 2% target next year before bouncing back in late 2027, the sources said.
The ECB will publish its first set of projections for 2028 in December and some policymakers thought that clear evidence pointing to a continued undershooting in inflation that year would justify debating a rate cut at the meeting, the sources said.
But others argued that long-term projections should be taken with a pinch of salt, given their track record, and in any case, a modest undershooting of just 20 or 30 basis points can be tolerated, the sources added.
An ECB spokesperson declined to comment.
HOW MUCH WIGGLE ROOM?
The debate is partly about how far the bank should be allowed to stray from its inflation target before policy needs to be adjusted.
The ECB's strategy, published earlier this year, allows for some wiggle room but does not precisely define its extent because it is "context-specific and depends on the origin, magnitude and persistence of the deviation", leaving policymakers with different views.
The ECB publishes point estimates for inflation as well as lower and upper bounds that represent the likely range of outcomes.
ECB President Christine Lagarde said at her news conference on Thursday that the central bank's "good place" for policy was not "fixed" and policymakers would treat the risk of undershooting as seriously as that of overshooting -- a principle known as symmetry.
(Reporting by Francesco Canepa and Balazs Koranyi; Editing by Ros Russell)