LONDON — Prime Minister Keir Starmer usually goes out of his way not to annoy Donald Trump. So he better hope the windmill-hating U.S. president doesn’t notice what the U.K. just did. In a fillip for the global offshore wind industry, Starmer’s government on Wednesday announced its biggest-ever down payment on the technology. It agreed to price guarantees, funded by billpayers to the tune of up to £1.8 billion (€2.08 billion) a year, for eight major projects in England, Scotland and Wales. The schemes have the capacity to generate 8.4 gigawatts of electricity, the U.K. energy department said — enough to power 12 million homes. It represented the biggest “wind auction in Europe to date,” said industry group WindEurope. It’s also an energy strategy that could have been tailor-made to rankle Trump. The U.S. president has repeatedly expressed a profound loathing for wind turbines and has tried to use his powers to halt construction on projects already underway in the U.S. — sending shockwaves across the global industry. Even when appearing alongside Starmer at press conferences, Trump has been unable to hide his disgust at the very sight of windmills. “You are paying in Scotland and in the U.K. … to have these ugly monsters all over the place,” he said, sitting next to Starmer during a visit to his Turnberry golf course last year. The spinning blades, Trump complained, would “kill all your birds.” At the time, the prime minister explained meekly that the U.K. was seeking a “mix” of energy sources. But this week’s investments speak far louder about his government’s priorities. The U.K.’s strategy — part of a plan to run the British power grid on 95 percent clean electricity by 2030 — is a clear signal that for all Starmer’s attempts to appease Trump, the U.K. will not heed Washington’s assertions that fossil fuels are the only way to deliver affordable bills and secure supply. “With these results, Britain is taking back control of our energy sovereignty,” said Starmer’s Energy Secretary Ed Miliband, a former leader of the Labour party. “With these results, Britain is taking back control of our energy sovereignty,” said Energy Secretary Ed Miliband. | Pool photo by Justin Tallis via Getty Images While not mentioning Trump or the U.S., he said the U.K. wanted to “stand on our two feet” and not depend on “markets controlled by petrostates and dictators.” WIND VS. GAS The goal of the U.K.’s offshore wind drive is to reduce reliance on gas for electricity generation. One of the most gas-dependent countries in Europe, the U.K. was hit hard in 2022 by the regional gas price spike that followed Russia’s invasion of Ukraine. The government ended up spending tens of billions of pounds to pay a portion of every household energy bill in the country to fend off widespread hardship. It’s a scenario that Miliband and Starmer want to avoid in future by focusing on producing electricity from domestic sources like offshore wind that are not subject to the ups and downs of global fossil fuel markets. Trump, by contrast, wants to keep Europe hooked on gas — specifically, American gas. The U.S. National Security Strategy, updated late last year, states Trump’s desire to use American fossil fuel exports to “project power.” Trump has already strong-armed the European Union into committing to buy $750 billion worth of American liquefied natural gas (LNG) as a quid pro quo for tariff relief. No one in Starmer’s government explicitly named Trump or the U.S. on Wednesday. But Chris Stark, a senior official in Miliband’s energy department tasked with delivering the 2030 goal, noted that “every megawatt of offshore wind that we’re bringing on is a few more metric tons of LNG that we don’t need to import.” The U.K.’s investment in offshore wind also provides welcome relief to a global industry that has been seriously shaken both by soaring inflation and interest rates — and more recently by a Trump-inspired backlash against net zero and clean energy. “It’s a relief for the offshore sector … It’s a relief generally, that the U.K. government is able to lean into very large positive investment stories in U.K. infrastructure,” said Tom Glover, U.K. country chair of the German energy firm RWE, which was the biggest winner in the latest offshore wind investment, securing contracts for 6.9 gigawatts of capacity. A second energy industry figure, granted anonymity because they were not authorized to speak on the record, said the U.K.’s plans were a “great signal for the global offshore wind sector” after a difficult few years — “not least the stuff in the U.S.” The other big winner was British firm SSE, which has plans to build one of the world’s largest-ever offshore wind projects, Berwick Bank — off the coast of Donald Trump’s beloved Scotland.

Donald Trump will be the major draw at this year’s World Economic Forum in Davos, Switzerland, even as the U.S. president’s policies continue to undermine the spirit of global cooperation the elite gathering has championed in the past. “We’re pleased to welcome back President Trump to Davos, and he’s bringing the largest U.S. delegation ever,” WEF chief executive Børge Brende said at a press conference Tuesday. The U.S. president will bring “five secretaries and also other key players,” including a bipartisan delegation from the U.S. Congress, Brende said. The World Economic Forum, which takes place next week in the Alpine ski resort, comes as the world hangs on Trump’s words. Since the start of the month, Trump has captured Venezuelan dictator Nicolás Maduro, threatened to invade Greenland, hinted he could take action in Iran over violent crackdowns on protesters, announced a temporary cap on credit card interest rates that has stoked fears of a credit crunch, and opened a criminal investigation into Jerome Powell, chair of the U.S. Federal Reserve. Brende said the meeting will take place “against the most complex geopolitical backdrop since 1945.” According to the WEF, Trump will be joined by Canadian PM Mark Carney, China’s Vice-Premier He Lifeng, Ukrainian President Volodymyr Zelenskyy and leaders from Israel and Palestine. From Europe, European Commission President Ursula von der Leyen will attend along with leaders from Germany, Spain, Belgium, Finland, Greece, Ireland, the Netherlands, Poland and Serbia. NATO Secretary-General Mark Rutte will also join. The informal grouping of countries supporting Ukraine, known as the “coalition of the willing,” are expected to meet with Trump and Zelenskyy on the sidelines of the WEF to seek U.S. backing for security guarantees for Ukraine, the Financial Times reported. Business leaders, including the head of AI giant Nvidia Jensen Huang and top executives from Microsoft, Meta, Palantir, Anthropic and OpenAI, will join senior leaders from JPMorgan, Goldman Sachs, BlackRock and other major finance players in Davos. International organizations, which have seen their standing and funding rocked by Trump’s administration — including last week’s U.S. withdrawal from dozens of international organizations and the world’s overarching climate change treaty — will also attend. The heads of the United Nations, the World Trade Organization, the World Bank, the International Monetary Fund, the World Health Organization and the Organisation for Economic Co-operation and Development will take part. Celebrities and artists including David Beckham, Yo-Yo Ma, Marina Abramović, Matt Damon and will.i.am will also attend. The theme of the gathering will be “A Spirit of Dialogue.” “We do hope that a spirit of dialogue can also lead to areas where the leaders can find overlaps in interests,” Brende said.

Croatia, Estonia, Finland, Latvia, Lithuania and Portugal will face off for the European Central Bank’s No. 2 job, according to a statement from the Council of the EU. The crowded race for the vice presidency kickstarts a wider battle for a seat on the ECB’s coveted six-person executive board, the eurozone’s most powerful forum for economic and monetary policy. Four of the seats, including the presidency itself, will become vacant over the next two years. Competition will be fierce, as the eurozone’s largest economies will seek to maintain their influence on the board, leaving smaller countries with fewer seats to fight over. Eurozone finance ministers are set to pick the winner behind closed doors in a secret ballot when they meet in Brussels for this month’s Eurogroup meeting on Jan. 19. The winner will need at least 16 votes from the 21 ministers, representing around 65 percent of the eurozone’s population. Eurozone leaders formally propose the candidate to succeed the outgoing vice president, Luis de Guindos, whose eight-year term ends on May 31. The European Parliament and the ECB are entitled to an opinion about the final pick. Northern European applicants make up the bulk of the contenders, with Finland’s central banker, Olli Rehn, facing competition from Baltic neighbors. These include his central banking peers, Estonia’s Madis Müller and Latvia’s Mārtiņš Kazāks. Lithuania’s former finance minister, Rimantas Šadžius, completes the Baltic round-up. The other two applicants come from Southern Europe: Portugal’s ex-Eurogroup president, Mário Centeno, and the Croatian central bank governor, Boris Vujčić. The candidates are tentatively scheduled to face questions from MEPs behind closed doors before finance ministers meet on Jan. 19.

The Bank of England is set to cut interest rates on Thursday, after lower-than-expected inflation figures and signs of a weakening jobs market. Headline inflation slowed to 3.2 percent in November, from 3.6 in October, the Office for National Statistics said on Wednesday. That was the lowest since March and a much clearer drop than predicted by analysts, who had forecast a rate of 3.5 percent. “A cut tomorrow should be a no-brainer, with another to follow in February,” Peel Hunt chief economist Kallum Pickering said via social media, pointing to “No growth since summer, a labor market that is rapidly cooling, and a big downside surprise to inflation across the board in November.” The news comes only a day after labor market data from the ONS showed the unemployment rate rising to its highest level in over four years in October. The economy has struggled for growth in the second half of this year, after a sugar rush in the first quarter in which exporters rushed to get their goods to the U.S. before President Donald Trump could impose trade tariffs. The hangover from that — and the lingering uncertainty over the global economic outlook caused by Trump’s trade policy — has been severe. But at the same time, an unwelcome rise in inflation has stopped the Bank of England from cutting interest rates more quickly to support the economy. A raft of hikes in government- controlled prices such as energy bills and rail fares meant that inflation was rising for much of the year, leading it to peak at 3.8 percent in September. That was also partly due to companies passing on increases in labor costs due to a 6.7 percent hike in the National Living Wage and an increase in employers’ National Insurance contributions. Panmure Liberum chief economist Simon French said the wide range of goods and services now showing softening price trends showed that demand is now so weak that companies are having to absorb those price increases themselves instead. The government will be particularly relieved to have seen politically sensitive food prices, which have been a constant bugbear for the last couple of years, making the biggest contribution to the slowdown in inflation in November. Prices for clothing and footwear and for discretionary services such as restaurants and hotels also fell slightly. “As Christmas gifts go, this is a most welcome one,” said Danni Hewson, head of financial analysis at AJ Bell. “It’s the time of year when people put a few more things in their supermarket trolley, so news that food and alcohol inflation has fallen will be a boon for cash-strapped families.” The Bank has consistently said that inflation would fall once those factors passed out of the annual calculations, given that the underlying weakness of the economy. However, with the worst bout of inflation in half a century still fresh in everyone’s minds, it has been forced to keep the pace of policy easing “gradual and cautious”. Peel Hunt’s Pickering said that the scale of the slowdown could be enough to have some members of the Monetary Policy Committee voting for a half-point cut in the Bank Rate to 3.5 percent on Thursday. However, the consensus remains for a quarter-point cut to 3.75 percent. The pound still fell over half a cent against the dollar in response to the numbers, as traders penciled in more scope for easing next year, while the government’s borrowing costs in the bond market also fell.

This article is also available in French and German. President Donald Trump denounced Europe as a “decaying” group of nations led by “weak” people in an interview with POLITICO, belittling the traditional U.S. allies for failing to control migration and end the Russia-Ukraine war, and signaling that he would endorse European political candidates aligned with his own vision for the continent. The broadside attack against European political leadership represents the president’s most virulent denunciation to date of these Western democracies, threatening a decisive rupture with countries like France and Germany that already have deeply strained relations with the Trump administration. “I think they’re weak,” Trump said of Europe’s political leaders. “But I also think that they want to be so politically correct.” “I think they don’t know what to do,” he added. “Europe doesn’t know what to do.” Trump matched that blunt, even abrasive, candor on European affairs with a sequence of stark pronouncements on matters closer to home: He said he would make support for immediately slashing interest rates a litmus test in his choice of a new Federal Reserve chair. He said he could extend anti-drug military operations to Mexico and Colombia. And Trump urged conservative Supreme Court Justices Samuel Alito and Clarence Thomas, both in their 70s, to stay on the bench. Trump’s comments about Europe come at an especially precarious moment in the negotiations to end Russia’s war in Ukraine, as European leaders express intensifying alarm that Trump may abandon Ukraine and its continental allies to Russian aggression. In the interview, Trump offered no reassurance to Europeans on that score and declared that Russia was obviously in a stronger position than Ukraine. Trump spoke on Monday at the White House with POLITICO’s Dasha Burns for a special episode of The Conversation. POLITICO on Tuesday named Trump the most influential figure shaping European politics in the year ahead, a recognition previously conferred on leaders including Ukrainian President Volodymyr Zelenskyy, Italian Prime Minister Giorgia Meloni and Hungarian Prime Minister Viktor Orbán. Trump’s confident commentary on Europe presented a sharp contrast with some of his remarks on domestic matters in the interview. The president and his party have faced a series of electoral setbacks and spiraling dysfunction in Congress this fall as voters rebel against the high cost of living. Trump has struggled to deliver a message to meet that new reality: In the interview, he graded the economy’s performance as an “A-plus-plus-plus-plus-plus,” insisted that prices were falling across the board and declined to outline a specific remedy for imminent spikes in health care premiums. Even amid growing turbulence at home, however, Trump remains a singular figure in international politics. In recent days, European capitals have shuddered with dismay at the release of Trump’s new National Security Strategy document, a highly provocative manifesto that cast the Trump administration in opposition to the mainstream European political establishment and vowed to “cultivate resistance” to the European status quo on immigration and other politically volatile issues. In the interview, Trump amplified that worldview, describing cities like London and Paris as creaking under the burden of migration from the Middle East and Africa. Without a change in border policy, Trump said, some European states “will not be viable countries any longer.” Using highly incendiary language, Trump singled out London’s left-wing mayor, Sadiq Khan, the son of Pakistani immigrants and the city’s first Muslim mayor, as a “disaster” and blamed his election on immigration: “He gets elected because so many people have come in. They vote for him now.” The president of the European Council, António Costa, on Monday rebuked the Trump administration for the national security document and urged the White House to respect Europe’s sovereignty and right to self-government. “Allies do not threaten to interfere in the democratic life or the domestic political choices of these allies,” Costa said. “They respect them.” Speaking with POLITICO, Trump flouted those boundaries and said he would continue to back favorite candidates in European elections, even at the risk of offending local sensitivities. “I’d endorse,” Trump said. “I’ve endorsed people, but I’ve endorsed people that a lot of Europeans don’t like. I’ve endorsed Viktor Orbán,” the hard-right Hungarian prime minister Trump said he admired for his border-control policies. It was the Russia-Ukraine war, rather than electoral politics, that Trump appeared most immediately focused on. He claimed on Monday that he had offered a new draft of a peace plan that some Ukrainian officials liked, but that Zelenskyy himself had not reviewed yet. “It would be nice if he would read it,” Trump said. Zelenskyy met with leaders of France, Germany and the United Kingdom on Monday and continued to voice opposition to ceding Ukrainian territory to Russia as part of a peace deal. The president said he put little stock in the role of European leaders in seeking to end the war: “They talk, but they don’t produce, and the war just keeps going on and on.” In a fresh challenge to Zelenskyy, who appears politically weakened in Ukraine due to a corruption scandal, Trump renewed his call for Ukraine to hold new elections. “They haven’t had an election in a long time,” Trump said. “You know, they talk about a democracy, but it gets to a point where it’s not a democracy anymore.” Latin America Even as he said he is pursuing a peace agenda overseas, Trump said he might further broaden the military actions his administration has taken in Latin America against targets it claims are linked to the drug trade. Trump has deployed a massive military force to the Caribbean to strike alleged drug runners and pressure the authoritarian regime in Venezuela. In the interview, Trump repeatedly declined to rule out putting American troops into Venezuela as part of an effort to bring down the strongman ruler Nicolás Maduro, whom Trump blames for exporting drugs and dangerous people to the United States. Some leaders on the American right have warned Trump that a ground invasion of Venezuela would be a red line for conservatives who voted for him in part to end foreign wars. “I don’t want to rule in or out. I don’t talk about it,” Trump said of deploying ground troops, adding: “I don’t want to talk to you about military strategy.” But the president said he would consider using force against targets in other countries where the drug trade is highly active, including Mexico and Colombia. “Sure, I would,” he said. Trump scarcely defended some of his most controversial actions in Latin America, including his recent pardon of the former Honduran President Juan Orlando Hernández, who was serving a decades-long sentence in an American prison after being convicted in a massive drug-trafficking conspiracy. Trump said he knew “very little” about Hernández except that he’d been told by “very good people” that the former Honduran president had been targeted unfairly by political opponents. “They asked me to do it and I said, I’ll do it,” Trump acknowledged, without naming the people who sought the pardon for Hernández. HEALTH CARE AND THE ECONOMY Asked to grade the economy under his watch, Trump rated it an overwhelming success: “A-plus-plus-plus-plus-plus.” To the extent voters are frustrated about prices, Trump said the Biden administration was at fault: “I inherited a mess. I inherited a total mess.” The president is facing a forbidding political environment because of voters’ struggles with affordability, with about half of voters overall and nearly 4 in 10 people who voted for Trump in 2024 saying in a recent POLITICO Poll that the cost of living was as bad as it had ever been in their lives. Trump said he could make additional changes to tariff policy to help lower the price of some goods, as he has already done, but he insisted overall that the trend on costs was in the right direction. “Prices are all coming down,” Trump said, adding: “Everything is coming down.” Prices rose 3 percent over the 12 months ending in September, according to the most recent Consumer Price Index. Trump’s political struggles are shadowing his upcoming decision on a nominee to chair the Federal Reserve, a post that will shape the economic environment for the balance of Trump’s term. Asked if he was making support for slashing interest rates a litmus test for his Fed nominee, Trump answered with a quick “yes.” The most immediate threat to the cost of living for many Americans is the expiration of enhanced health insurance subsidies for Obamacare exchange plans that were enacted by Democrats under former President Joe Biden and are set to expire at the end of this year. Health insurance premiums are expected to spike in 2026, and medical charities are already experiencing a marked rise in requests for aid even before subsidies expire. Trump has been largely absent from health policy negotiations in Washington, while Democrats and some Republicans supportive of a compromise on subsidies have run into a wall of opposition on the right. Reaching a deal — and marshaling support from enough Republicans to pass it — would likely require direct intervention from the president. Yet asked if he would support a temporary extension of Obamacare subsidies while he works out a large-scale plan with lawmakers, Trump was noncommittal. “I don’t know. I’m gonna have to see,” he said, pivoting to an attack on Democrats for being too generous with insurance companies in the Affordable Care Act. A cloud of uncertainty surrounds the administration’s intentions on health care policy. In late November, the White House planned to unveil a proposal to temporarily extend Obamacare subsidies only to postpone the announcement. Trump has promised on and off for years to unveil a comprehensive plan for replacing Obamacare but has never done so. That did not change in the interview. “I want to give the people better health insurance for less money,” Trump said. “The people will get the money, and they’re going to buy the health insurance that they want.” Reminded that Americans are currently buying holiday gifts and drawing up household budgets for 2026 amid uncertainty around premiums, Trump shot back: “Don’t be dramatic. Don’t be dramatic.” SUPREME COURT Large swaths of Trump’s domestic agenda currently sit before the Supreme Court, with a generally sympathetic 6-3 conservative majority that has nevertheless thrown up some obstacles to the most brazen versions of executive power Trump has attempted to wield. Trump spoke with POLITICO several days after the high court agreed to hear arguments concerning the constitutionality of birthright citizenship, the automatic conferral of citizenship on people born in the United States. Trump is attempting to roll back that right and said it would be “devastating” if the court blocked him from doing so. If the court rules in his favor, Trump said, he had not yet considered whether he would try to strip citizenship from people who were born as citizens under current law. Trump broke with some members of his party who have been hoping that the court’s two oldest conservatives, Clarence Thomas and Samuel Alito, might consider retiring before the midterm elections so that Trump can nominate another conservative while Republicans are guaranteed to control the Senate. The president said he’d rather Alito, 75, and Thomas, 77, the court’s most reliable conservative jurists, remain in place: “I hope they stay,” he said, “’cause I think they’re fantastic.”

LONDON — Nigel Farage’s second-in-command called for a rethink of the U.K.’s interest rate-setting committee in a fresh sign that a Reform UK government could intervene in Britain’s independent central bank. Richard Tice, the deputy leader of the populist-right party that’s surging in U.K. polls, told POLITICO in an interview that there should be a debate over potentially sweeping changes to the make-up and role of the Bank of England’s Monetary Policy Committee (MPC).  “It’s not unreasonable to check whether or not we’ve got the membership of the MPC right. I mean, it’s almost 30 years,” he said, referencing the 1997 establishment of the MPC. “So you could say, well, have we got the membership right? Have we got the number of government representatives right? Should they or shouldn’t they have a vote? Have we got the mandate right?”  He added: “Should it have a growth mandate? We should have that debate.”  The BoE’s rate-setting committee is made up of nine members, including Governor Andrew Bailey, four senior central bank executives, and four independent external members appointed by the chancellor. A representative from the U.K. Treasury joins MPC meetings but is not allowed to vote.   Monetary policy has become increasingly politicized since the Covid-19 pandemic, after which inflation soared to double digits and the BoE raised rates to their highest levels in 15 years. The International Monetary Fund has warned the U.K. faces the highest inflation in the G7 this year and next.   Tice’s comments come ahead of a speech in the City of London Wednesday, where he is expected to set out a wide-ranging aspiration for financial services deregulation should Reform UK enter government in Britain’s 2029 general election. The deputy leader said the U.K. needs a “complete sea change” in how risk is approached in the City, and called for further red tape cutting on banks, hedge funds and other City giants. “No one’s stepping back and asking big, philosophical questions,” he said.   Tice told POLITICO his party is “happy” with the BoE’s independence, but said it is “ridiculous” that “no one dares to” question the performance of the central bank despite the U.K. “outsourcing all responsibility for massive issues that affect ordinary people.”  He argued the BoE had “failed” under Conservative Liz Truss, who was forced out as prime minister after bond yields spiked in the wake of a tax-cutting budget, leading banks to increase their lending rates. Tice accused City regulators of “missing” the issue of liability-driven investments (LDIs), which increased the strain on pension funds during that period, and said the Bank of England “could have actually stepped in and prevented the carnage.”  Truss has repeatedly blamed the Bank of England for failing to anticipate the market consequences of her budget. The central bank intervened after her mini-budget to calm the markets by implementing an emergency bond buying scheme.  WIDER REFORM Reform leader Farage, who is set to give a speech in the City Monday on his broader vision for the economy, has gone further, saying Bailey has “had a good run” and he “might find someone new” if the party wins the next election.  Bailey’s term is due to end in 2028, before the election. Tice did not rule out the prospect of a Reform government forcing out an underperforming central bank governor in future, saying: “At the end of the day, any public official has to be accountable for their performance.”  However, he declined to liken Reform’s stance to Donald Trump’s approach to the Federal Reserve, after the U.S. president repeatedly attempted to get rid of chair Jerome Powell.  Reform UK is currently ahead in the polls, as Britain’s Labour government continues to struggle with its messaging on the economy, immigration and frustration within Prime Minister Keir Starmer’s top ranks. Reform leader Nigel Farage, who is set to give a speech in the City Monday on his broader vision for the economy. | Mark Kerrison/Getty IMages Tice argued Labour — which has made growth its primary objective by rolling back 2008 financial crisis legislation — is adding rather than removing regulation, and accused it and the opposition Conservatives of “tinkering around the edges.”  “We’re not going to create any form of meaningful growth under the current trajectory of this government, or under the trajectory of any Conservative plans,” he said. “We are heading towards impoverishment and growth has relentlessly declined as borrowing has relentlessly increased, particularly if you look per head. And it requires a complete sea change in the way that we think about risk and reward.”  Asked whether a Reform government would go further than Labour on deregulation, Tice said: “Yes. We want to ask some very big questions about how we do things.”  Tice also argued that regulators such as the Financial Conduct Authority — which Farage hopes to strip of its role regulating banks — have “utterly failed to do their job.”  Asked if he believes Britain has now moved on enough since the 2008 financial crisis to strip away “protections,” he replied: “There are all sorts of different reasons why the ’08 crash happened. But we supposedly had all the mechanisms of protection there, and they failed. No one was properly held to account.” 

Inflation in the eurozone edged down in October as higher prices for food and industrial goods were offset by another drop in energy costs. According to preliminary data from Eurostat on Friday, annual inflation slowed to 2.1 percent, in line with consensus estimates, from 2.2 percent in September. The slowdown comes despite Germany and Spain reporting higher-than-expected consumer price increases on Thursday. Energy prices fell by 0.2 percent on the month and 1.0 percent on the year, against a backdrop of continued increases in oil supply. However, unprocessed food prices continued to rise, albeit at a slower rate of 0.7 percent on the month. That left them up 3.2 percent on the year in October, down from a peak of 5.5 percent in August. Despite a modest increase of only 0.1 percent in prices in October, services price inflation hit its highest level in over six months at 3.4 percent. The metric is closely watched by the European Central Bank (ECB) because of its close link to wage growth, which accelerated to around 4 percent in the second quarter. Persistent services inflation can eventually feed through the rest of the economy, and could drive prices higher across the basket of goods being measured. However, ECB President Christine Lagarde repeated on Thursday that she expects wage growth to slow again in the coming months. The ECB held its key interest rate unchanged at 2 percent on Thursday, with the Bank emphasizing that inflation was in a “good place” and that it would continue with its wait-and- see approach. While the latest inflation reading is only a touch above the Bank’s 2-percent target, the persistence of inflation in the services sector will likely make the ECB reluctant to lower interest rates any further for the foreseeable future.

The European Central Bank left its key interest rate unchanged at 2 percent on Thursday, with the euro area economy still proving itself resilient and with inflation reasonably steady around the Bank’s target. The decision was consistent with guidance from policymakers that monetary policy is in “a good place,” giving them room to wait for year-end projections that will include the ECB’s first inflation forecast for 2028. The economy grew a faster-than-expected 0.2 percent in the third quarter of this year, while preliminary data showed inflation ticking up to 2.2 percent in October, calming fears about a possible undershoot. “The economy has continued to grow despite the challenging global environment,” the ECB said in its statement. “The robust labor market, solid private sector balance sheets and the Governing Council’s past interest rate cuts remain important sources of resilience.” At the same time, however, the ECB warned that “the outlook is still uncertain, owing particularly to ongoing global trade disputes and geopolitical tensions.” Risks remain abundant: beyond potential delayed effects from new U.S. tariffs, they include a further strengthening of the euro, as the U.S. Federal Reserve continues to lower its own rates. On Wednesday, the Fed cut rates by another quarter-point — the second consecutive reduction — citing a slowdown in job growth. Domestically, a delay to Germany’s fiscal stimulus measures and France’s ongoing budget crisis could also threaten to push the ECB out of its “good place.” Even so, a growing number of economists believe the central bank has reached the end of its easing cycle, a recent Reuters survey showed. While a slim majority of analysts last month expected one more rate cut before the end of 2026, nearly 60 percent now anticipate no further changes to borrowing costs in the current cycle.

The Central Bank of the Russia Federation lowered its key interest rate today and slashed its growth forecast for 2025 as the country’s economy is battered by a combination of high inflation and wide-ranging Western sanctions. The move comes after the U.S. imposed sanctions on two of its major oil suppliers, Rosneft and Lukoil. Oil and gas account for around a fifth of Russia’s gross domestic product (GDP). The bank updated its outlook, forecasting that the economy would grow by between 0.5 to 1 percent in 2025, down from 1 to 2 percent earlier. It also lowered its key interest rate by 0.5 percentage points, to 16.5 percent, despite forecasting an uptick in inflation next year, to between 4 to 5 percent. It’s unusual for a central bank to lower its policy rate while revising its inflation outlook upward, since lower rates are usually linked to higher inflation, and central banks are tasked with maintaining price stability. However, the combination of managing escalating foreign sanctions on the economy, together with the need to maintain a high level of industrial output to produce the armaments necessary to prolong its war on Ukraine, has put the bank’s governor, Elvira Nabiullina, in a tough spot. Ukraine’s ongoing drone campaign aimed at crippling Russia’s oil refineries has heaped further pressure on the country’s economic output. On Thursday, Herman Gref, who heads Russia’s largest lender Sberbank, said that it had been a mistake to focus too much on inflation at the expense of economic growth. In its statement, the central bank said that it sees inflationary pressures increasing in the medium term, as tax hikes, trade disruption and fluctuations in the oil price all bite. “Geopolitical tensions remain a significant uncertainty factor,” it said.

U.K. Chancellor Rachel Reeves’ Wednesday started with a much-needed fillip, in the form of data suggesting inflation peaked below 4 percent in September. The Office for National Statistics said consumer prices were unchanged on the month while the headline rate stayed at 3.8 percent on the year, below the City’s forecast for 4 percent. Importantly, the slowdown was the result of lower food prices, which have an outsize impact on lower-income families and on broader perceptions of inflation. Food inflation slowed to 4.5 percent from 5.1 in the year through August. The figures will come as a relief to Reeves for a number of reasons: first, they will reduce the cost of servicing Britain’s debt, a quarter of which is directly tied to the inflation rate; second, they could take some of the pressure off the upcoming public sector pay round. Those two factors have both threatened to spoil the chancellor’s arithmetic as she prepares her budget at the end of next month. The figures may also revive some expectations of an interest rate cut from the Bank of England by year-end. A string of disappointingly strong inflation reports over the spring and summer convinced most in the markets that the BoE wouldn’t be able to cut again until next year. At 3.8 percent in September, inflation is still nearly double the bank’s 2 percent target. However, with last year’s drop in regulated energy prices now falling out of the calculations, the BoE expects the headline rate to decline slowly from now on.