Luis de Guindos: Presentation of the ECB Annual Report 2025 to the Committee on Economic and Monetary Affairs of the European Parliament
The desk anticipates a sustained stability in the euro area, bolstered by the ECB's commitment to price stability and a gradual normalization of monetary policy. Per the full note source, the ECB's recent decision to maintain the deposit facility rate at 2.0% reflects confidence in the ongoing disinflation process, with inflation averaging 2.1% in 2025. This outlook aligns with our consensus target of 1.075 for EUR/USD, as we see potential for the euro to strengthen against the dollar amid a resilient economic backdrop. However, upcoming inflation data on June 2 could serve as a catalyst for market movements.
What the desk is arguing
The desk posits that the ECB's current monetary policy stance will support the euro's stability against the dollar. The ECB's Vice-President, Luis de Guindos, highlighted a moderate recovery in the euro area, with growth at 1.4% and inflation closely tracking the ECB's target, which underpins this view. Per the full note source, the ECB's data-dependent approach suggests that any shifts in economic indicators will be closely monitored, particularly in light of external uncertainties.
Supporting this thesis, the ECB's decision to keep interest rates unchanged, alongside a robust labor market and moderating inflation, indicates a cautious yet optimistic outlook. The ECB's commitment to a symmetric inflation target of 2% allows for flexibility in response to economic fluctuations, which could further bolster the euro's position. The disinflation process remains on track, with inflation averaging 2.1%, providing a solid foundation for the ECB's policy decisions.
Where it sits in our coverage
Our consensus target for EUR/USD is 1.075, with a range of 1.04 to 1.12. Notable firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This view aligns with jpmorgan, which anticipates a stronger euro, while bofa presents a more cautious outlook at the lower end of the range. The desk's call is positioned toward the upper bound of the consensus spread, suggesting a bullish sentiment on the euro.
How other firms see it
Firms like jpmorgan and citi are aligned with the desk's optimistic view on the euro's strength, citing the ECB's effective management of inflation and economic growth. Conversely, bofa and deutsche express a more bearish stance, focusing on potential external shocks and their impact on the euro area.
Key currency pairs to watch include EUR/USD and EUR/GBP, as the ECB's policy decisions will likely influence these trajectories in the near term. Additionally, the relationship between the ECB's interest rate decisions and US monetary policy will be crucial in shaping market sentiment.
Key takeaways
- 01The ECB maintains a deposit facility rate of 2.0%, reflecting confidence in the euro area's economic recovery.
- 02Inflation in the euro area averaged 2.1% in 2025, closely aligning with the ECB's medium-term target.
- 03The upcoming inflation data on June 2 could act as a significant market catalyst.
- 04The ECB's commitment to a symmetric inflation target allows for flexibility in policy responses.
Market implications
Traders should monitor the upcoming inflation data on June 2, as it could impact the ECB's future policy decisions and the euro's strength against the dollar. A stronger-than-expected inflation print could reinforce the bullish outlook for EUR/USD.
SPEECH Presentation of the ECB Annual Report 2025 to the Committee on Economic and Monetary Affairs of the European Parliament Introductory remarks by Luis de Guindos, Vice-President of the ECB, at the ECON Committee of the European Parliament Brussels, 4 May 2026 It is a privilege to present the ECB’s Annual Report for 2025 to this Committee. As you may know, it is the last time I will do so, as my eight-year mandate as Vice-President comes to an end later this month. That makes today’s exchange particularly meaningful for me.
Alongside the Annual Report, we are publishing our formal response to the European Parliament’s resolution on last year’s report. These two documents are at the heart of the ECB’s accountability to the Parliament and our ongoing dialogue. I will start my remarks by reviewing economic and monetary policy developments during the year before discussing our broader activities and efforts to strengthen the Economic and Monetary Union.
The euro area economy in 2025 from an ECB perspective The euro area economy experienced a moderate and broad-based recovery in 2025, despite a challenging global environment. Growth picked up to 1.4% for the year, underlining the resilience of the euro area economy. Growth was partly boosted by strong exports in the first quarter, reflecting frontloading ahead of anticipated higher US tariffs.
As that momentum faded, growth was sustained by domestic demand, which helped counter external headwinds in an environment of elevated uncertainty. A robust labour market, moderating inflation and the effects of our interest rate cuts also supported the recovery. The disinflation process continued broadly on track in 2025, with euro area inflation averaging 2.1%, close to the ECB’s medium-term target of 2.0%.
The progress made on inflation and a favourable inflation outlook allowed the Governing Council to reduce the deposit facility rate further, by 100 basis points, to 2.0% by mid-2025, where it has remained since. The gradual normalisation of the Eurosystem balance sheet, which began in 2022, also continued. In 2025 we also concluded the assessment of the ECB’s monetary policy strategy.
It reaffirmed the symmetric 2% medium-term inflation target and recognised the importance of an appropriately forceful or persistent response to large, sustained deviations from the inflation target in either direction . The assessment also underlined how important it is for our monetary policy deliberations to consider not only the most likely path for inflation and growth, but also the surrounding risks and uncertainty – for example by actively using scenarios. The ECB remains focused on its mandate of price stability.
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