FX.co ★ ECB Sees Policy as Appropriate Amid Balanced Risks: Minutes

European Central Bank officials generally agreed that the existing policy approach aligns with the 2% inflation target over the medium term, according to the minutes from the ECB’s September meeting. Despite varied opinions—some members perceived inflation risks as leaning downward, while a few considered them upward—there was consensus that current interest rates are robust enough to handle potential shocks, given the dual inflation risks. Furthermore, the euro area economy, while relatively stable, exhibits weak growth and faces multiple risks. Concerns were expressed about escalating geopolitical tensions and the implications of increased defense spending on fiscal policy. Between June 2024 and June 2025, the ECB reduced borrowing costs by 200 basis points, pausing in July once inflation hit its target. Current investor sentiment suggests that interest rates will remain steady in the short term, with a potential shift back to tightening projected for late 2026.