Saturday, 1 November 2025
The European Central Bank (ECB) opted to keep interest rates unchanged at its latest meeting, maintaining a cautious stance amid growing signs of economic weakness across the eurozone. The decision leaves borrowing costs at their current level, with the deposit rate remaining at 2 percent, as policymakers continue to weigh slow growth against easing inflation.
While the ECB described its approach as data-driven, some economists argue that the bank missed an opportunity to reassure investors and businesses about its readiness to act should conditions worsen. Marcel Fratzscher, President of the German Institute for Economic Research (DIW Berlin), said the central bank should have sent a clearer message that it stands ready to cut rates if necessary to support the economy.
“The ECB continues to act very cautiously,” Fratzscher noted, adding that multiple risks — from trade tensions and the ongoing war in Ukraine to political instability in parts of Europe — could weigh heavily on output and confidence. He warned that tighter financing conditions are beginning to affect businesses and households, suggesting that the current policy stance may be overly restrictive.
Economic data from across the euro area point to a weaker recovery than expected earlier in the year. Business investment remains subdued, and credit surveys show only limited lending appetite despite moderating inflation. Analysts say that while the ECB’s decision to hold rates steady reflects prudence, stronger forward guidance could have eased uncertainty in financial markets and improved access to financing.
For now, the ECB insists that future moves will depend on incoming data, keeping its options open for either prolonged stability or potential easing in 2026. But with growth forecasts being revised downward, pressure is likely to build on the central bank to act sooner rather than later if the slowdown deepens.
Source: DIW Berlin
