ECB keeps rates unchanged
The European Central Bank (ECB) maintained interest rates unchanged for a fifth consecutive meeting, in line with expectations. The bank reaffirmed that euro-area inflation is projected to converge towards target over the medium term, with the economic path broadly aligned with its December forecast.
President Christine Lagarde described the eurozone economy as “broadly balanced”, noting that growth has remained resilient amid external uncertainties. This performance has been supported by the lagged impact of earlier rate reductions and complimented by the gradual expansion of public investment on defence and infrastructure.
Addressing questions on the EUR/USD exchange rate, Lagarde stated that the ECB continues to monitor market conditions closely but highlighted that the currency pair has remained range-bound since the summer and foreign exchange moves since last year were incorporated in the bank’s baseline.
BoE holds rates steady
The Bank of England (BoE) held interest rates steady in what proved to be a tightly balanced decision, with the Monetary Policy Committee voting five–four to maintain the current rates, despite reduction to its forecast for Britain’s economic growth this year and a rise in unemployment. While markets had anticipated no change in policy, a stronger majority in favour of holding rates had been expected.
Governor Andrew Bailey was among the five members supporting the pause, noting that the committee would reassess its position should the projected decline in inflation prove sustained rather than temporary. With inflation remaining persistent and economic momentum subdued, the bank has been adopting a cautious approach, emphasising the need for measured policy adjustments as borrowing costs approach a level that neither fuels inflation nor drag on an economy still struggling to overcome the aftereffects of various economic disruptions.
US economics
Job openings declined by 386,000 in December, marking the third consecutive monthly drop and signalling increasing downside risks to labour-demand conditions. The figure fell notably short of expectations and was accompanied by subdued labour-market turnover, with both the hiring and separation rates holding at 3.3%, consistent with the range observed over the past year.
December’s reading indicates 0.87 job vacancies per unemployed individual, the lowest ratio since March 2021. The ISM services PMI held steady at a solid 53.8 in January, in line with expectations, though underlying components were mixed.
The key development was a renewed rise in uncertainty following fresh tariff concerns. Cost pressures continue to appear more pronounced in services than in manufacturing. While ISM manufacturing data show some easing in input-price pressures, albeit from elevated levels, the services index indicates limited relief, with the latest reading still close to its recent peaks. At the same time, further lengthening in supplier delivery times underscores ongoing supply-chain constraints.
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).
