The ECB Governing Council rules out 50 basis point hikes and keeps the cost of money at 2.5%, the highest level since March 2025. Sources close to Frankfurt anticipate new increases of 25 basis points, possibly in December.
The European Central Bank (ECB) has decided to keep interest rates at 2.5%, its highest level since March 2025, and completely rules out 50 basis point hikes in the near future. Information provided by moncloa.com indicates that the Governing Council chaired by Christine Lagarde is opting for more measured moves of 25 basis points, with December as a likely date for the next adjustment.
The decision comes in the context of rising inflation driven by the closure of the Strait of Hormuz and the war in Iran, which has strained energy prices across the eurozone. However, the body based in Frankfurt believes that the shock is less severe than expected, except in the energy sector, and that the expectations of businesses and households remain anchored.
Lagarde herself has acknowledged her surprise at how little the inflationary shock has affected food and wages. This containment of second-round effects is key to the ECB's strategy, which avoids comparisons with 2022, when inflation exceeded 10% and the central bank raised rates by 75 basis points in one go. Now, the cost of money is 150 basis points below the record levels of 2023.
The difference with 2022 is not in discourse, but in the starting point: the ECB has already raised rates twice and is now choosing the pace.
The internal debate is not whether to raise or lower rates, but how much more to tighten. According to the calculations of the central bankers themselves, one or two more hikes of 25 basis points would be enough to enter a monetary restriction, the situation in which financing conditions hinder growth. The October meeting is more open than the last ones, and geopolitical uncertainty keeps that door ajar.
In addition, there is the movement of the Federal Reserve, which raised rates last week and has calmed the concerns with which Frankfurt was looking at Washington. The US tightening will have negative effects on global growth due to the weight of the dollar, but according to monetary sources, it helps contain imported inflation.
In Spain, the impact is direct. The 12-month Euribor, the benchmark for most variable-rate mortgages, will remain at high levels while Frankfurt keeps rates at 2.5% or raises them another notch. Every additional tenth in the index translates into tens of euros a month for families reviewing their payments.
Businesses are not spared either. Bank financing becomes more expensive, and highly leveraged sectors such as construction, tourism, or agriculture feel the brake before anyone else. On the positive side, Spanish banks continue to squeeze their interest margins with high money prices. The paradox is evident: the same rates that squeeze families fatten the banks' accounts.
Within the ECB Governing Council itself, the pulse is the same as always. The hawks from the north (Bundesbank, Dutch central bank, Austrians) have been pushing for a more decisive restriction for months, while the governors from the south, led by Spain and Italy, prefer not to strangle the recovery with hikes that are already being felt in credit. Lagarde moves between both, aware that each meeting is a balance between anti-inflation credibility and the risk of recession.
The reading for Spain has three layers. The first is the cost of public debt: with rates at 2.5% and the Treasury refinancing maturities every year, each month of high rates increases the interest bill. The second is the external sector: a strong euro due to high rates reduces the competitiveness of Spanish exports. The third is politics: Moncloa defends a softer monetary tone in Brussels while the opposition demands tax cuts to compensate for the mortgage blow.
The precedent of 2022-2023 is the one that monetary sources repeat the most. Back then, the ECB raised rates from zero to 4.5% in just over a year, and Spain, with public debt exceeding 100% of GDP, was one of the countries that felt the turnaround in financing costs the most. The current cycle is less aggressive but longer. The next meeting of the ECB Governing Council will be in October, where it will be decided whether to maintain the current pace or opt for a new increase of 25 basis points.
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