The European Central Bank did not change its monetary policy at the end of its September meeting. For European finance ministers, who forecast inflation of 2.1% in 2025, 1.7% in 2026 and 1.9% in 2027, the current monetary policy will enable the target of a 2% annual rise in prices to be achieved.
They are also more confident about short-term economic activity in the eurozone, with GDP growth now expected to reach 1.2% this year, compared with 0.9% in the June forecasts.
Growth stimuli are local responsibilities
However, growth will remain weak in the coming years, at only 1% in 2026 and 1.3% in 2027. But the ECB believes that "it is up to governments to prioritise structural reforms and strategic investments that promote growth while ensuring the sustainability of public finances".
Emphasising that it has succeeded in its mission to stabilise inflation at 2% and that others must focus on GDP growth, the ECB has clearly announced that it will not take action to stimulate economic activity in the eurozone.
The monetary easing that brought the main policy rate down from 4.50% to 2.15% is likely over. A decline in inflation expectations would be needed for the ECB to proceed with a final round of monetary easing.
Europe will still be sluggish
The growing likelihood of an end to monetary easing in the eurozone, while it is widely accepted that the US Federal Reserve will further reduce its key interest rate, has caused the euro to jump above the $1.17 mark.
However, European stock markets closed higher, with investors focusing on the upward revision of 2025 growth rather than the possible end of monetary easing. We do not share this optimism.
With exports weakened by US tariffs and the appreciation of the euro, as well as increasingly fierce competition from Chinese products seeking new markets, the European economy will remain sluggish in the coming years.
This is why we are not buying eurozone equities as part of our portfolio strategy:
However, some European companies are attractive on an individual basis.