ECB Maintains Interest Rates Amid Global Uncertainty, Inflation Near 2% Target

The European Central Bank's Governing Council announced it would maintain the three key interest rates unchanged, with inflation remaining close to the 2% medium-term target amid ongoing global uncertainties such as trade disputes and geopolitical tensions. The economy continues to grow, supported by a robust labor market, solid private sector balance sheets, and previous rate cuts, alongside increased investments in IT infrastructure and defense-related sectors, though these could impact inflation. The ECB emphasized a data-dependent, meeting-by-meeting approach to future monetary policy decisions without committing to a predetermined rate path, focusing on inflation stabilization and financial market stability. Despite easing food inflation, persistent energy inflation and geopolitical risks contribute to an uncertain outlook, with the ECB prepared to adjust instruments as needed to ensure inflation targets and smooth monetary policy transmission. The ECB also highlighted the negligible risks to the EU banking system and balanced growth risks, while acknowledging the uncertain impact of AI on the job market. Overall, the ECB maintains a cautious stance prioritizing stability and careful risk assessment in a challenging global environment.