GDP growth in the euro area
Seasonally adjusted GDP in both the euro area and EU grew by 0.3% in the fourth quarter of 2025 matching the euro area’s pace from the previous quarter, according to a preliminary flash estimate published by Eurostat.
According to an estimation based on quarterly seasonally and calendar adjusted data, full-year 2025 GDP growth is estimated at 1.5% for the euro area and by 1.6% for the EU. Country-level data showed a broadly constructive picture. Lithuania posted the strongest quarterly increase, up by 1.7%, followed by Spain and Portugal both up by 0.8%, while Ireland was the only member state to record a contraction at -0.6%.
Year-on-year growth was positive across most reporting members, highlighting economic resilience despite ongoing structural and policy challenges.
Eurozone economic sentiment indicator rises
Following a subdued December, the European Commission’s economic sentiment indicator rose to 98.2 in January from 97 the previous month.
Among the largest member states, France recorded a particular notable rebound, with the sentiment indicator jumping to 100.4 from 94.6 in the previous month. This uptick is likely reflecting a significant reduction in political uncertainty after the 2026 Budget got approved. Across sectors, the improvement was mainly broad-based, with confidence rising across industry, services, retail trade, and among consumers, while construction was the only sector showing a slight decline.
Fed holds firmly on pause
The US Federal Reserve kept interest rates unchanged on January 28, with chair Jerome Powell noting a solid economy and that risks to both inflation and employment have eased. This backdrop suggests that there could be a lengthy wait before any additional reductions in borrowing costs. In line with expectations, the Federal Reserve held interest rates steady in a range of 3.5-3.75% during the first meeting of the year.
The vote, however, was not unanimous. Two Federal Open Market Committee officials, Stephen Miran and Chris Waller, dissented in favour of a 25-basis point cut. The Fed’s decision comes at a particularly sensitive time for the central bank. US President Donald Trump announced on Janaury 30 that he is nominating Kevin Warsh, a former Federal Reserve governor, to be the next US central bank chief. His decision caps a closely watched search for a successor to Powell, whom the president has repeatedly lambasted for not cutting interest rates more swiftly.
This article does not constitute legal and, or financial advice and is being issued for information purposes only by Bank of Valletta plc, 58, Zachary Street, Valletta. Bank of Valletta is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap.371 of the Laws of Malta) and the Investment Services Act (Cap.370 of the Laws of Malta).
