ECB Insight: Meeting Account Validates the Hold but Keeps an “Insurance Cut” on the Table

9 October 2025

By David Barwick – FRANKFURT (Econostream) – The account of the ECB’s September Governing Council meeting reads like a textbook case for patience: inflation “close to the 2% medium-term target,” risks “on both sides,” and – as in July – “a high option value to waiting for more information.”

Yet embedded in the text is a notable dovish strand from Chief Economist Philip Lane, namely that “a further rate cut in the coming months would better protect the inflation target” under the baseline and in adverse scenarios — even as the Council ultimately chose to sit tight last month.

That patience was of course already mirrored in market pricing, with investors having converged on the view that rates were “in a good place.” The convergence reflected reduced rate uncertainty and the evaporation of expectations for further 2025 easing, effectively validating the ECB’s message since June.

Lane’s presentation confirmed why. The staff projections barely moved, with headline inflation stabilizing near 2% and underlying measures showing little change. Wage growth is easing as catch-up effects fade, and exchange rate appreciation is reinforcing disinflation. For the Council, this alignment between data, forecasts and market pricing justified waiting and reinforced the case for viewing the current stance as appropriate.

But the minutes also surface a tension that matters for the path ahead. Several members see downside risks to inflation over the medium term: via an exogenous euro appreciation with potentially larger pass-through, deeper trade diversion pushing prices lower, a softer U.S. or abrupt market correction, and the possibility that ETS2 is delayed or proves mainly a one-off.

A few members, by contrast, emphasize upside risks in the form of tariffs and supply-chain fragmentation, firmer domestic demand, slower pass-through of lower import costs, sticky services pricing, demographics that keep labor tight, and the chance that defense and infrastructure spending hits capacity sooner.

Two lines are especially telling. First, the meeting concludes that the environment is sufficiently uncertain that the bar for immediate action is high: “no immediate pressure to change policy rates” and clear value in waiting. Second, members caution against “fine-tuning” for “moderate fluctuations of inflation around the target,” implying tolerance for small deviations unless a “significant” medium-term miss is in prospect.

Set against those guideposts, Lane’s sentence about a future cut “better protect[ing] the inflation target” reads as a conditional nudge rather than a signal: it stakes out the intellectual case for an insurance cut if the distribution of risks tilts more clearly to the downside.

The same paragraph in the account is explicit that upside risk materialization would argue for maintaining current rates. In other words, the Council’s true near-term choice set is binary: cut modestly if the downside intensifies, or hold, with hikes conspicuously absent from consideration.

That interpretation aligns well with Lane’s speech earlier this week, which likewise framed the choice as binary and subtly tilted toward easing, as we observed then.

Two additional policy-relevant threads from the account merit attention. First, the minutes lean into structural context: follow-through on the Draghi competitiveness agenda, savings and investments union, banking union, and a digital euro framework.

The macroeconomic projections implicitly assume these impulses help underpin demand and investment; slippage here would matter for both growth and inflation paths.

Second, the account highlights that ETS2’s inflation impact in 2027 may be “merely transitory,” with a base-effect drag in 2028 — a reminder that headline wiggles around the emission-trading step should not be over-interpreted.

Ultimately, the September account validates the market view that the ECB is comfortable holding for now and resistant to micro-adjusting around 2%. But it also preserves a coherent route to easing if the medium-term picture drifts below target, and it records that several members already see that risk.

Lane’s framing ensures the insurance-cut option remains intellectually live, even as the Council, for the moment, prizes the value of time.