ECB’s Escrivá says current interest rates appropriate as inflation hits 2% target

A member of the Governing Council and the General Council of the European Central Bank (ECB), José Luis Escrivá, expressed his satisfaction with the current borrowing costs.

His remarks followed an interview with El Diario, in which he pointed out that, just as it is their tradition for the European Central Bank to share its views in statements after each meeting, Escrivá hinted that they would have one soon. 

According to him, since inflation reached its 2% target, they believe “it is a good time to look ahead and consider that the current interest rates are suitable.”

These developments follow remarks by ECB Governing Council member Edward Scicluna, who stated that the central bank should take its time before adjusting interest rates, as the global economy is still grappling with the full impact of the new U.S. trade tariffs.

According to him, inflation in Europe may go up if the tariffs raise the prices of imported goods. However, at the same time, prices might also fall if the tariffs slow down global trade and reduce demand for goods and services. Scicluna noted that it would be a mistake to make any rash decisions, as no one can tell for sure which way this will go.

Individuals express eagerness for the ECB’s upcoming meeting 

Individuals have expressed their eagerness to know the ECB’s conclusions on interest rates after sources revealed that the central bank will announce its next rate decision on October 30. Experts have also weighed in, anticipating that the bank will maintain the deposit rate at 2%. Notably, this percentage has been unchanged since June this year.

Therefore, with inflation now comfortably within the ECB’s 2% target, economists and markets highlighted that they do not expect any adjustments at the bank’s final meeting in December. 

Regarding the situation, Escrivá pointed out Spain’s economic success, stating that apart from the country’s strong growth, the positive growth difference compared to Europe is at an all-time high. 

“This is even more surprising because Spain’s economy has become more connected with the rest of Europe,” the governor of Banco de España, the Bank of Spain, added.

On the other hand, reliable sources have indicated that Spain will release its new output data next Wednesday. Following this announcement, some analysts shared their expectations that the country’s economy will grow by 0.6% in the three months leading up to September. This contrasts with the 0.1% growth in the euro zone, where information will be released on Thursday. 

Europe faces significant challenges in its economy 

According to a survey of economists from a trusted source, the European Central Bank is expected to maintain borrowing costs in the euro zone at 2% until 2027. This outlook assumes that the deposit rate will be maintained at its current level during next week’s monetary-policy meeting.

However, some experts anticipated that there could be additional changes: one-third of those surveyed are looking for at least one more cut, beyond the eight already made, and 17% expect there will be at least one or more increases by the end of next year.

The December meeting is important because it will feature new projections that stretch to 2028 for the first time. Meanwhile, under the leadership of their president, Christine Lagarde, analysts have noted that ECB officials do not appear to be adjusting interest rates anytime soon, expressing satisfaction with the rise in consumer prices and Europe’s robust economy. Additionally, they believed that their policy is flexible enough to respond to new challenges.

Like any other continent, Europe faces economic challenges. To illustrate, the continent is facing escalating trade friction between the US and China, particularly over semiconductors and rare earth materials.

Credit downgrades are also making it a tougher financial situation for France, and there are growing fears about ambitious plans for infrastructure and defense spending in Germany.

Additionally, a potential postponement of the continent’s new emissions-trading system could put downward pressure on inflation in the years to come. At the same time, high asset valuations fuel fears of a potential market crash. 

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