In introductory remarks to the European Parliament’s ECON Committee, the European Central Bank presented its 2025 Annual Report and its formal response to Parliament’s resolution on the previous report. The remarks recapped that the euro area economy grew by 1.4% in 2025, inflation averaged 2.1%, and the Governing Council reduced the deposit facility rate by 100 basis points to 2.0% by mid-2025 before leaving interest rates unchanged at its latest meeting amid uncertainty linked to the war in the Middle East and volatile energy markets. The presentation also reviewed broader 2025 policy work. The ECB’s monetary policy strategy assessment reaffirmed the symmetric 2% medium-term inflation target and the need for an appropriately forceful or persistent response to large, sustained deviations in either direction, while giving greater weight to risks and uncertainty through tools such as scenarios. Outside monetary policy, the Bank said the digital euro project had moved to a phase focused on technical readiness, market engagement and the legislative process, with preparation for a pilot exercise in 2027 and a potential first issuance in 2029 if the necessary regulation is adopted in 2026. The remarks also highlighted work on a modern cash framework and new euro banknotes, the Appia and Pontes initiatives for distributed ledger technology based wholesale settlement in central bank money, contributions to the savings and investments union and banking union agenda, and simplification proposals for prudential, supervisory and reporting frameworks that would preserve the current level of resilience.
European Central Bank 2026-05-04
European Central Bank presents 2025 Annual Report outlining a 2.0% deposit facility rate and potential digital euro issuance in 2029
The European Central Bank’s 2025 Annual Report to the European Parliament’s ECON Committee noted euro area growth of 1.4%, average inflation of 2.1%, and a cumulative 100 basis point cut in the deposit facility rate to 2.0% by mid-2025, with rates then kept unchanged amid uncertainty. It reaffirmed its symmetric 2% medium-term inflation target and outlined broader work including the digital euro’s shift to a technical readiness and legislative phase, a pilot envisaged for 2027 and potential issuance in 2029, plus initiatives on cash and banknotes, DLT-based wholesale settlement, capital markets and banking union, and simplification of prudential, supervisory and reporting frameworks.