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BIZ & FINANCE SATURDAY | DEC 13, 2025

Hike or hold? Five questions for ECB o European Central Bank set to maintain key interest rate at 2%, but firmer growth and sticky inflation have revived debate

that the euro is bothered. Lagarde previously called the use of the assets legally and financially “stretched”, but has since said the latest plan is the closest to complying with international law. What do we know about ECB’s board revamp? The ECB has kicked off a two-year process that will replace most of its executive board, starting with Vice-President Luis de Guindos early next year. A number of smaller countries have thrown their hats into the race, suggesting that a smaller nation, possibly for the first time from the east, may get a chance. But the next three seats are more important and include the presidency. Bigger economies are likely to continue dominating the board. The process is not expected to have a material impact on ECB policy, with markets more focused on changes at the US Federal Reserve. Morgan Stanley’s chief Europe economist Jens Eisenschmidt said Lagarde had given the ECB Governing Council a stronger voice than in the past, taking on more of a moderating role among her peers. Any new president is likely to continue that approach, although the degree will probably differ, he added. – Reuters

she added it would not come soon. What policymakers – dovish or hawkish – seem to agree on is that rates are likely to stay on hold in the foreseeable future, as do economists polled by Reuters. Much depends on how much German fiscal stimulus boosts growth, whether the euro – up 13% this year – appreciates further, and how much lower energy prices and cheap Chinese goods weigh on inflation. “German fiscal stimulus and the EU-wide defence spending will be almost fully offset by the drag from higher US tariffs,” said Vanguard senior economist Shaan Raithatha, who said the risk is still further rate cuts. What do Ukraine talks mean for the ECB? If a peace deal emerges, it should support European growth and lower energy prices. But the immediate economic impact won’t change the ECB’s thinking, economists said. “We should remember Europe has made it clear it doesn’t want Russian gas again,” said Schroders’ Lauro. An EU plan to use frozen Russian assets to fund a loan to Ukraine is a concern for the ECB if it damages the euro’s standing when policymakers want to boost its status as a reserve currency. For now, there’s no sign in financial markets

LONDON: The European Central bank (ECB) meets next Thursday, with traders suddenly speculating a rate hike could be on the cards in 2026. Since policymakers last met in October, there has been more evidence to back up their mantra that policy remains in a “good place”. Having taken further cuts off the table, investors will watch whether the ECB gives them reason to stick with rate hike bets. Here are five key questions for markets: What will the ECB do next week? Hold its key rate at 2% for a fourth straight meeting. Recent data shows the economy grew 0.3% in the third quarter, much faster than the ECB had forecast in September, and that inflation is proving stickier than expected. ECB chief Christine Lagarde has already set the tone, repeating her “good place” message this week. What will the 2028 inflation forecast show? Inflation returning to the 2% target or a little BRUSSELS: Alphabet’s Google is expected to be fined by EU antitrust regulators next year for not doing enough to comply with EU rules against favouring its own services and products in search results, people familiar with the matter said. A penalty against Google will likely rile the US, which has criticised a slew of landmark EU laws as taking aim at US tech companies despite EU denials to the contrary. The world’s most popular internet search engine was charged by the European Commission in March with favouring its own services such as Google Shopping, Google Hotels and Google Flights over competitors. The case pits Google against vertical search engines, which are specialised search engines with links to a specific sector, and hotels, airlines, restaurants and transport services. The two latter groups also compete for more prominent spots in Google’s search results, resulting in conflicting demands on Google. Since the Commission’s March charges, Google has

higher, economists expect. It’s the first time the ECB will forecast for 2028. A return to target should strengthen policymakers’ argument that an inflation slump expected over the next two years will be temporary. Part of the reason is the postponement of the EU’s new emissions trading system to 2028 from 2027, which also means inflation may be revised further below target in 2027, economists said. For this year and next, some expect inflation to be revised higher. And Lagarde has already pointed to an upward growth revision. “The forecasts will provide more hawkish signals,” said Schroders economist Irene Lauro. What will ECB policy look like next year? Traders reckon the ECB will keep rates steady, but are now pricing in a roughly 30% chance that it will hike rates by the end of 2026. Just last week a cut was the tail risk. Hawkish policymaker Isabel Schnabel fuelled the shift in expectations on Monday by saying the next move could be a hike, though offered a series of tweaks to its search results, with the last proposal in October, but this still falls short of complying with the Digital Markets Act, which makes it illegal for Big Tech to promote its services and products, the people said. The Commission, which acts as the EU competition enforcer, and Google declined to comment. A Google spokesman has previously said that any further changes to Search would prioritise the commercial interests of a small set of intermediaries over European businesses who want to sell directly to their customers. Google can still make changes to comply with the DMA to stave off a fine, the people said. DMA violations can lead to fines as much as 10% of a company’s global annual turnover. The self-preference case is separate from an investigation into its app store Google Play, where the company similarly risks a fine next year, sources have told Reuters.

Google said to be facing EU fine for favouring own services

Global EV sales growth slows, China plateaus GDANSK: Global EV sales grew in November at the slowest rate since February 2024 as China plateaued, while the end of an EV tax credit scheme in the US set North America on track for its first year of decline since 2019, data showed. In Europe, registrations of electric vehicles including battery-electric and plug-in hybrids, maintained strong growth thanks to national incentive programmes and are up by a third so far this year compared with the same period of 2024, consultancy Benchmark Mineral Intelligence data showed. They were up by 3% in China to more than 1.3 million, the lowest year-on-year increase since February 2024. North American registrations fell by 42% to just over 100,000 cars sold. Europe and the rest of the world were up respectively by 36% and 35% to more than 400,000 and almost 160,000 registrations. Context

In a further push against electrification, US President Donald Trump last week proposed slashing fuel economy standards finalised by his predecessor. The EU has delayed until next week the release of closely watched proposals for the auto sector that could also weaken a 2035 ban on new CO2 emitting cars. In China, the world’s biggest car market accounting for more than half of global EV sales, reduced government subsidies near the end of the year are expected to dent consumer sentiment overall. – Reuters

(BMI) said on Friday. Why it’s important

Electric transport groups say a swift EV transition is necessary to curb planet-warming CO2 emissions, but carmakers and governments have backtracked on some green commitments due to slower-than anticipated EV adoption, which auto lobby groups say threatens jobs and profit margins. By the numbers Global EV registrations, a proxy for sales, rose by 6% to just under 2 million units in November, the

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