Monetary policy faces potential interference from politics, ECB cautions
ECB Maintains Stable Mortgage Rates Amid Optimistic Outlook for German Economy
In a recent statement, Luis de Guindos, Vice-President of the European Central Bank (ECB), expressed optimism about the German economy, stating that it is now the engine of growth in Europe. This shift in perspective comes after Germany was previously referred to as the 'sick man of Europe.'
De Guindos reiterated the ECB's commitment to its legally guaranteed independence, which is essential for maintaining price stability. He emphasized that historical evidence shows that interference in monetary policy can lead to inflation and rising mortgage rates.
During the September 2025 meeting, the ECB kept its key mortgage rates unchanged, signaling that the current mortgage rate level is considered appropriate for now. The bank adopted a cautious 'wait-and-see' approach, given that inflation is near the 2% target and economic growth is steady.
Financial markets were described as calm and orderly by de Guindos. He also noted that no new signs of liquidity gaps, inflation, or concerns about bond spreads were observed. The ECB committee agreed to keep all options open for future adjustments to monetary policy.
De Guindos acknowledged challenges in Germany, such as over-reliance on cheap energy from Russia and difficulties in the previous business model due to trade disputes. However, he commended Germany for setting an important course with the special fund for infrastructure.
In response to questions about the growing deficit in France and increasing defense spending in Europe, de Guindos did not comment on the ECB's role. He instead emphasized the importance of European treaties for sound public finances.
Regarding the ECB's bond purchase programme TPI, de Guindos stated that there is currently no need for the bank to intervene. He also highlighted the need for the ECB to act carefully to avoid volatility in markets.
The spreads between the government bonds of Eurozone countries are not a cause for concern, as per de Guindos. The decision not to lower mortgage rates was unanimous in the ECB Council.
De Guindos emphasized the importance of adhering to the ECB's current mortgage rate, as deemed appropriate by the bank. He also noted that no specific actions or decisions were announced in the given paragraph.
In conclusion, the ECB maintains stable mortgage rates amid an optimistic outlook for the German economy. The bank continues to monitor the financial markets closely and remains committed to its mandate of maintaining price stability and supporting economic growth.
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