Ethenea: The ECB between stagnation and inflation concern

Ethenea: The ECB between stagnation and inflation concern

October 28, 2025

ECB

Will the European Central Bank (ECB) change interest rates on 30 October? Most likely not, says Jörg Held, Head of Portfolio Management at ETHENEA Independent Investors S.A. Instead, the central bank is in wait-and-see mode.

The ECB currently considers the risks to growth and inflation to be balanced. The central bank is maintaining its data-dependent stance in order to retain maximum flexibility for future decisions. The market is therefore unlikely to price in any immediate change in interest rates.

Stagnation meets stubborn core inflation

The eurozone continues to struggle with stagnation, with 0% growth in real gross domestic product expected for the third quarter of 2025. Hard indicators such as industrial production were weak in a month-on-month comparison of the major economies (down 1.2%), contrasting with the relative resilience of the purchasing managers' indices (PMIs).

At the same time, core inflation remains stubbornly high. In September, it increased slightly to 2.4% year-on-year, with services inflation remaining stable at 3.2% annually. Nevertheless, downside risks to inflation persist, stemming from Chinese overcapacity and the appreciation of the euro, for example.

Flexibility after the interest rate pause remains a priority

Despite the expected interest rate pause, ECB President Christine Lagarde emphasised that the easing cycle may not be over yet. While some Council members, such as Joachim Nagel, see no need for action, Governor Villeroy de Galhau stated that the next move is more likely to be a cut in interest rates.

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