ECB Officials Affirm Current Interest Rates Appropriate Amid Inflation Goals

European Central Bank (ECB) officials, including Governing Council member Jose Luis Escriva and Bundesbank President Joachim Nagel, have affirmed that the current monetary policy and interest rates are appropriate and do not require further adjustments in the near term. Escriva emphasized that risks to inflation are balanced, though potential trade disruptions from the U.S. could pose inflationary pressures. The ECB's cautious stance reflects an uncertain economic environment but a resilient growth outlook, with no significant downside risks materializing so far. Market analysis indicates that euro rate markets are well balanced, showing limited expectations for rate cuts this year, as inflation is projected to mildly undershoot the ECB's 2% target in 2026 without triggering volatility. Long-term inflation expectations suggest a potential gradual increase in 10-year swap rates, supported by fiscal impulses adding to price pressures. Overall, the ECB has shifted to a neutral policy stance following recent rate cuts, maintaining full optionality but signaling no immediate need for further changes.