European Central Bank Vice-President de Guindos says inflation is on track at 2% and flags elevated trade and non-bank financial stability risks

In a speech at Spain Investors Day, European Central Bank Vice-President Luis de Guindos framed the euro area outlook against heightened global uncertainty linked to changes in US policy, the imposition of sizeable US import tariffs and elevated geopolitical risks. He argued that euro area inflation remains “in a good place”, with headline inflation at 2.0% in December and the ECB’s assessment still pointing to stabilisation at the 2% target over the medium term, while activity has remained resilient and growth projections have been revised up to above 1% in 2026 and 1.4% in subsequent years. He highlighted that uncertainty is weighing on growth via delayed corporate investment and higher household precautionary savings, even as fiscal policy in several euro area countries is set to ease to accommodate higher spending including on defence and security. Disrupted trade patterns could complicate inflation dynamics in either direction, while financial stability risks were described as elevated due to stretched valuations in increasingly concentrated markets, liquidity and leverage vulnerabilities in non-banks and opaque private markets, and rising bank–non-bank interlinkages through short-term funding and leveraged credit exposures. The speech also pointed to sovereign risk channels linked to fiscal challenges, including market concerns over US fiscal credibility and potential spillovers, and called for banks to maintain strong solvency and liquidity, for closer macroprudential monitoring and stronger regulation of the non-bank sector, and for simplification of EU banking rules alongside progress on the Single Market and completion of the banking union.