Fidelity International: ECB keeps underestimating downside inflation risks

February 6, 2026

Inflation Interest Rates ECB

Commenting on today’s European Central Bank decision, Salman Ahmed, Global Head of Macro and Strategic Asset Allocation at Fidelity International, said:

'The European Central Bank (ECB) left interest rates and forward guidance unchanged as expected, with little shift from their narrative that things are currently in a good place from their perspective.

On the economic outlook, the ECB have taken solace in solid Q4 growth prints to reemphasise their message of growth resilience, but we see some risks of undershooting inflation in the latest January print being sustained.

While rates are likely to be held in the near-term we still see clear risks that undershooting inflation may prove to be persistent, prompting action by the ECB over the course of the year. The recent fall in services inflation is consistent with expected wage disinflation, while trade diversion from China also remains prominent in shaping our view of downside risks to inflation alongside a further euro appreciation. On the other side, the ECB will be monitoring any persistence in commodity price increases.

Moreover, we see risks to monetary policy transmission through a tightening of financing conditions - with recent ECB surveys and bank interest rate data pointing to tighter firm financing conditions. This may lead to the ECB considering if action is needed to keep the broader financing environment from becoming unduly restrictive.'