ECB Minutes (Feb): some judged inflation risks as being to the downside, a few judged risks to the upside.

• It was suggested that the range of estimates of the nominal natural rate of interest had shifted up. However, it was pointed out that the increase largely reflected rounding effects. 

• Members agreed inflation should stabilise at the 2% target in the medium term, supporting patience and policy optionality.
• Most judged inflation risks two-sided and broadly unchanged since the previous meeting.
• Some judged inflation risks tilted to the downside, citing Chinese import competition, euro appreciation and weaker exports.
• A few judged risks tilted to the upside, citing energy prices, wage pressures and stronger growth momentum.
• Several argued rates could remain at current levels for an extended period if the baseline outlook held.
• Some warned increasing disinflationary pressures could risk a material undershoot of the inflation target.

• Members agreed global trade growth had decelerated and was expected to weaken in 2026 owing to tariffs and policy uncertainty.
• Some said higher tariffs and a stronger euro were weighing on euro area exports.
• Some said exports to the United States had declined significantly excluding pharmaceuticals.
• Several highlighted increasing Chinese export competition in euro area and third-country markets.
• Some said cheaper Chinese imports supported euro area real incomes but could threaten domestic industries.

• Members agreed inflation had remained close to the 2% target and should stabilise around target over the medium term.
• Most measures of longer-term inflation expectations remained around 2%, supporting stabilisation around target.
• Members noted headline inflation declined to 1.7% in January, mainly owing to negative energy inflation.
• Some said services inflation had slowed alongside moderating wage growth.
• Some said goods inflation had been subdued partly owing to falling Chinese import prices.
• Some argued disinflationary pressures from China could persist owing to overcapacity and weak domestic demand.
• Some warned stronger euro appreciation could further dampen inflation.
• A few warned persistent energy price increases could raise inflation.
• Some warned fragmented supply chains and geopolitical shocks could push inflation higher.
• Some warned extreme weather events could raise food prices.

• Members agreed the labour market remained resilient, with unemployment at 6.2%.
• Some noted labour demand had cooled, with vacancies returning to pre-pandemic levels.
• Some said the labour market remained tight and could continue to exert upward pressure on wages.
• Some noted negotiated wage growth was expected to moderate in 2026.

• Members agreed the euro area economy remained resilient, growing 0.3% in the fourth quarter of 2025.
• Members agreed domestic demand had become the main driver of growth.
• Several said services, particularly information and communication technology, continued to drive growth.
• Some said investment in digital technologies and public spending could support stronger growth.
• Some warned uncertainty, trade tensions and competitiveness challenges posed downside risks.
• Some said consumption remained subdued owing to high saving and weak confidence.

• Members agreed the euro had appreciated modestly against the US dollar but remained broadly stable in nominal effective terms.
• Some said the euro’s appreciation over the past year could dampen exports and inflation.
• Some said exchange rate movements had limited implications for the near-term inflation outlook.

The ECB minutes reflect a divided outlook on inflation risks, with some members viewing pressures as mildly negative while others see potential upside due to energy and wages. The general consensus suggests a continuation of accommodative policies, potentially keeping rates unchanged for an extended period as the economy navigates challenges like trade and foreign competition. This nuanced stance could influence EUR stability and market expectations around future rate paths.