ECB Wrap: Recap of Week From Saturday 26 July to Friday 1 August 2025

1 August 2025

By David Barwick – FRANKFURT (Econostream) – With summer holidays getting underway, the past week has been quiet, though not devoid of developments. While the next rate decision of the European Central Bank on 11 September is still relatively far off, the latest events on balance probably do not tend to favour further easing.

Policymaker comments: The few comments from Governing Council members over the last week point to an ECB potentially on hold next month. In an interview published Saturday in Slovenian national daily Delo, Executive Board member Piero Cipollone seemed reluctant to make the case for another rate cut, suggesting merely that in September ‘and later this year’, the ECB would be better able to make an informed decision. Currently, he said, there were ‘conflicting signals’, with growth risks still on the downside but inflation prospects ‘more uncertain than usual.’ In a blog post on Monday, National Bank of Slovakia Governor Peter Kažimír said, ‘I don't expect anything fundamental from the incoming economic data that would motivate me to act in September. I mean changing the level of key interest rates.’ Kažimír is normally hawkish anyway; his counterpart at the Central Bank of Ireland, Governor Gabriel Makhlouf, is more centrist, so potentially a better barometer of median sentiment on the Council. In a blog post on Tuesday, Makhlouf said, ‘For my part, I think we have reached a point in our easing cycle where we can wait and see whether the data and evidence indicates the need for a change in our monetary policy stance.’
Wages: The ECB’s tracker of active collective bargaining agreements, updated Wednesday, showed that wage pressures in the euro area have continued to ease and pointed to further slowing ahead that the ECB called ‘consistent with data published following June 2025 Governing Council meeting’, meaning the staff macroeconomic projections for the euro area.
Inflation expectations: The June results of the ECB consumer expectations survey, released Tuesday, showed unchanged median expectations for inflation three and five years ahead (2.4% and 2.1%, respectively) and a slight decline in median expectations for inflation over the next 12 months (down 0.2 to 2.6%).
Chinese exports: ECB economists on Wednesday published research suggesting the risk of a ‘significant’ redirection of Chinese exports to Europe in response to US tariffs and showing that this could lower euro area overall inflation by about 0.15pp in 2026, with a smaller impact the following year, and shave up to 0.5pp off non-energy industrial goods inflation.
In other news: In an unexpected turn of events, Central Bank of Malta Governor Edward Scicluna will return from the leave of absence he has been on for a year and resume exercising his duties as governor, Malta’s government announced Tuesday. Scicluna will thus again attend ECB Governing Council meetings, replacing Alexander Demarco, who had been holding down the fort as acting governor. That should start with the 11 September meeting, but is unlikely to change anything. Although Scicluna is fairly dovish (he was ready to start cutting interest rates already in March of last year), Demarco is also no hawk. In any case, Scicluna, who will turn 79 one month after the meeting, seems unlikely to remain in office beyond the end of his current term on 31 December.