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October 30, 2025EUROPEAN CENTRAL BANK MONETARY POLICY The European Central Bank (ECB) announced today that it would leave the three key ECB interest rates unchanged. The interest rates on the deposit facility, main refinancing operations and the marginal lending facility will remain at 2.0%, 2.15%, 2.4% respectively.
The European economy grew by 0.2% in the third quarter of 2025 supported by growth in the service sector, boosted by tourism, and an increase in digital services. Surveys suggest that many firms have increased their efforts to modernise their IT infrastructures and integrate AI into their operations. Manufacturing was held back by higher tariffs, high economic uncertainty and a stronger euro.
The unemployment rate was at 6.3% in September, close to historical lows and ECB notes that demand for labour has cooled. Households continue to save a large portion of their income, which should give them greater margin to increase spending further. Government expenditure in defence and infrastructure as well as previous interest rate cuts are expected to support investment.
Inflation (HICP) increased to 2.2% in September due to a slower decline in energy prices. Energy price inflation was -0.4% in September and food price inflation eased to 3.0%. ECB states that inflation indicators of underlying inflation remain consistent with their 2% medium-term target.
The EU-US trade deal reached over the summer, the recently announced ceasefire in the Middle East and today’s announcement of progress in the US-China trade negotiations have mitigated some of the downside risks to economic growth. However, the outlook for inflation continues to be more uncertain than usual on account of the still volatile global trade policy environment.
The asset purchase programme (APP) and Pandemic Emergency Purchase Programme (PEPP) portfolios are declining at a measured and predictable pace, as the Eurosystem no longer reinvests principal payments from maturing securities.
The Governing Council notes it is determined to see inflation stabilise at its 2.0% medium-term target. The Transmission Protection Instrument is also available to counter unwarranted, disorderly market dynamics that pose a serious threat to the transmission of monetary policy across all euro area countries, thus allowing the Governing Council to more effectively deliver on its price stability mandate.
The next scheduled monetary policy meeting will be on December 17-18, 2025.
Source: European Central Bank:Monetary policy decisions (Press Release); Press Conference;
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