De Guindos reviews 2025 ECB Annual Report: Recovery, rate cuts
ECB Vice-President Luis de Guindos presented the European Central Bank's Annual Report for 2025 to the European Parliament. He highlighted a moderate euro area recovery and 100 basis points of rate cuts to 2.0 percent by mid-2025.
Euro area economy in 2025: Growth and disinflation
The euro area economy experienced a moderate and broad-based recovery in 2025, achieving 1.4 percent growth despite a challenging global environment.
This resilience was supported by robust domestic demand, a strong labour market, and moderating inflation.
Euro area inflation averaged 2.1 percent for the year, closely aligning with the ECB's 2.0 percent medium-term target.
This progress allowed the Governing Council to reduce the deposit facility rate by 100 basis points, reaching 2.0 percent by mid-2025, where it has since remained.
The gradual normalisation of the Eurosystem balance sheet also continued throughout the year.
The ECB's monetary policy strategy assessment concluded in 2025, reaffirming the symmetric 2 percent medium-term inflation target and stressing the importance of considering risks and uncertainty in policy deliberations.
Digital euro advances, regulatory frameworks strengthened
Beyond monetary policy, 2025 saw significant progress in strengthening the Economic and Monetary Union.
The ECB advanced the digital euro project to its next phase, focusing on technical readiness, market engagement, and the legislative process, with a pilot exercise planned for 2027 and potential first issuance in 2029.
Efforts also continued on a modern cash framework and new euro banknotes.
Additionally, the ECB developed a strategy for a tokenised European financial ecosystem through initiatives like Appia and Pontes, aiming to enhance efficiency and innovation.
Contributions were also made to a robust regulatory framework and the simplification of reporting for banks, including input to the European Commission's proposals on the savings and investments union and the completion of the banking union.