ECB’s Guindos Stresses Rate Stability Amid Heightened Economic Uncertainty

Luis de Guindos, Vice-President of the European Central Bank, stated on January 8, 2026, that the eurozone’s current benchmark interest rate of 4.5% is suitable given the latest economic indicators. He emphasized that monetary policy remains firmly anchored in its primary objective of price stability, with inflation still above the ECB’s 2% target but showing signs of gradual moderation. The central bank’s latest projections indicate that headline inflation will decline to 2.3% by the end of 2026, down from 2.9% in Q4 2025. Core inflation, excluding energy and food, is expected to settle at 2.7% by year-end. Despite these improvements, de Guindos noted that underlying risks remain elevated, citing geopolitical tensions, persistent supply chain disruptions, and volatile energy prices as key contributors to uncertainty. Financial markets responded with measured volatility. The euro strengthened to 1.09 against the U.S. dollar, while German 10-year bond yields rose 6 basis points to 2.42%, reflecting investors’ cautious stance on future rate cuts. The Spanish IBEX 35 index dropped 1.2% as risk appetite cooled, while Italian government bond yields edged up to 3.61% amid lingering concerns over fiscal sustainability. De Guindos reiterated that the ECB will not rush to cut rates, underscoring that any decision will be data-dependent and consistent with its commitment to ensuring inflation returns sustainably to target. He emphasized that the central bank is prepared to act if economic conditions shift materially, but no immediate changes are anticipated.