Blog post by By Stefan Gebauer, Georgios Georgiadis, Fédéric Holm-Hadulla and Thomas Kostka | The monetary policies of the ECB and the US Federal Reserve are not always in sync. But how does the Fed’s policy affect the euro area economy? This ECB Blog looks at how monetary policy in the United States travels across the Atlantic and what this means for the ECB.
The global economy is interconnected. Central banks’ monetary policies therefore often affect other economies. These “monetary policy spillovers” are particularly relevant for economies as closely linked as the United States and the euro area. Spillovers from US monetary policy initially work in the opposite direction to ECB monetary policy, but then later in the same direction. For instance, a surprise tightening of US policy leads to an initial increase in euro area inflation as the euro weakens. However, over time, tighter US monetary policy drags down euro area inflation much like tighter ECB policy would.
In more detail, when the Fed unexpectedly raises interest rates to curb inflation and economic activity, euro area inflation increases on average over the three months following the announcement. This is because, following a surprise tightening in the United States, the euro immediately weakens against the dollar. And that makes imported goods more expensive. This effect is particularly relevant for euro area imports priced in US dollars, such as oil and other commodities. The weaker euro also cheapens euro area exports to the United States. This, in turn, supports economic activity and prices in the euro area slightly. Hence, over the short run, the spillovers from a surprise US monetary policy tightening on the euro area economy work in the opposite direction to the effects of a monetary policy tightening by the ECB. This is visible in the left-hand parts of each subplot of Chart 1.
Over time, however, the initial inflationary impact of higher policy rates in the US is compensated by broader disinflationary pressures. Tighter US financing conditions spill over to the euro area through global financial markets, leading to a slowdown in euro area economic activity. At the same time, the Fed’s tightening also weighs on economic activity in the US over time, with lower demand by US households and firms also implying lower imports from the euro area. Overall, the medium-term effects of US monetary policy on the euro area therefore resemble the dampening impact of similar actions by the ECB. This means that – while the immediate impacts might differ – in the medium term US monetary policy pushes the euro area economy in the same direction as euro area policy changes would. These effects can be seen for the same variables on the right-hand parts of each subplot in Chart 1.

Chart 1
Impact of euro area (EA) and US monetary policy shocks on the euro area economy

Source: ECB staff calculations.
Notes: Impulse responses (IR) for selected horizons, scaled to 25 bps reaction in the 3-months OIS rate and the 3-months US Treasury bill rate, respectively, derived by local projections (Jorda (2005)). ECB and Fed monetary policy shocks are identified via high-frequency movements in short-term market rates over a narrow window (ca. 135 minutes) around ECB and Fed policy meetings applying “poor man’s” sign restrictions as in Jarocinski and Karadi (2020). Euro area shocks are extracted from the policy-event database of Altavilla et al. (2019). The euro area outcome variables are: (i) the Harmonised Index of Consumer Prices (left panel), (ii) industrial production (right panel). All variables are in log-levels. The local projections control for the lagged dependent variables, the Euro-Dollar exchange rate, euro area exports to and euro area imports from the US, the euro area unemployment rate, log-levels of US industrial production and the US Consumer Price Index, the euro area Composite Indicator of Systemic Stress (CISS), the IMF Commodities Price Index, the GDP-weighted 10-year yields on euro area sovereign bonds, the euro area 3-months OIS rate, and the other jurisdiction’s monetary policy shocks. Moreover, forward dummies for the COVID-19 pandemic (from March 2020 to April 2023) and the war in Ukraine (from March 2022 onwards) enter the model at the same horizon as the dependent variables. All data are at monthly frequency for the 2002m1-2024m5 period. Standard errors are derived from the Newey and West (1987) estimator to account for autocorrelation and heteroskedasticity. Results are comparable to estimates presented in Ca’ Zorzi et al. (2023). Additional details are available in Gebauer et al. (2025).

How did we come up with these findings?
We used an empirical method called local projections to analyse the impact of US monetary policy surprises, or “shocks”, on the euro area. Shocks correspond to the change in monetary policy that goes beyond the regular response of a central bank to economic developments. Studying such shocks provides clearer insights into the cause-and-effect relationships of policy with subsequent economic developments. The monetary policy shocks are derived by measuring financial market movements in a tight time window around monetary policy decisions on either side of the Atlantic. Having isolated the shocks, we integrated them into a local projections model that – based on historical regularities – tells us how economic variables, such as euro area inflation and industrial production, respond to US and euro area monetary policy shocks over time. This approach helps distinguish between short-term and medium-term effects and thus provides a nuanced understanding of how policy impacts unfold.
And why is it important?
Our findings have important implications for the conduct of the ECB’s monetary policy in the presence US monetary policy spillovers. Simply mimicking a surprise move in US policy rates might avert short-term spillovers, such as higher (or lower) inflation. Over the medium term, however, this would add to the tightening (or easing) impulse from abroad which, all else equal, would create risks that the ECB in turn undershoots (or overshoots) its domestic inflation target. Accounting for such medium-term spillovers is important because of the explicit medium-term orientation embedded in the ECB’s inflation target.
The views expressed in each blog entry are those of the author(s) and do not necessarily represent the views of the European Central Bank and the Eurosystem.
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References
Altavilla, C., Brugnolini, L., Gürkaynak, R. S., Motto, R., and Ragusa, G. (2019). Measuring euro area monetary policy. Journal of Monetary Economics, 108:162–179.
Ca’ Zorzi, M., Dedola, L., Georgiadis, G., Jarocinski, M., Stracca, L., and Strasser, G. (2023). Making waves: Monetary policy and its asymmetric spillovers in a
globalised world. International Journal of Central Banking, 19(2):95–144.
Gebauer, S., Georgiadis, G., Holm-Hadulla, F., and Kostka, T. (2025). Macroeconomic effects of (de-) synchronized monetary policy shocks. mimeo.
Georgiadis, G. and Jarocinski, M. (2023). Global spillovers from multi-dimensional us monetary policy. ECB Working Paper Series, 2881.
Jarocinski, M. and Karadi, P. (2020). Deconstructing monetary policy surprises—the role of information shocks. American Economic Journal: Macroeconomics, 12(2):1–43.
Jorda, O. (2005). Estimation and inference of impulse responses by local projections. American Economic Review, 95(1):161–182.
Newey, W. K. and West, K. D. (1987). A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix. Econometrica, 55:703– 708.
 
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Blog post by Christine Lagarde, President of the European Central Bank, and Ursula von der Leyen, President of the European Commission | Remaining competitive is fundamental for Europe’s future. We need faster economic growth and higher productivity to protect the quality of life for Europeans – from their jobs and incomes to their security and welfare.
Europe must act. Our competitiveness is at risk. While a global revolution in artificial intelligence unfolds, the EU could find itself on the sidelines. Our traditional manufacturing champions are losing global market share. Geopolitical shifts are turning dependencies into vulnerabilities and burdening our companies with high energy prices.
Europe must and will find its place in this new world. The prospects for our continent are better than they might seem. The EU has strengths on which it can build – and it has a plan to fix its weaknesses.
Europe has strong economic fundamentals. We have institutions governed by the rule of law, and an independent central bank committed to price stability. Inflation is returning to the ECB’s 2% target, allowing borrowing costs to fall. Public debts and deficits are lower than in other major economies.
Europe also has the necessary ingredients to catch up in the technological race. The EU turns out almost as many STEM graduates per million inhabitants as the United States. That talent produces a lot of ideas: Europe’s share in global patent grants is close to that of the United States. And we have the money to finance them, with households saving around €1.3 trillion every year.
We have an opportunity to bring down energy prices in a lasting way. The shift to secure, low-cost clean energy sources is on track: by 2030, over 40% of our energy consumption will come from renewables. And we are well placed to become a global hub for clean tech innovation, especially as some countries strike out in a different direction.
While others must cut their dependencies by building up domestic capacity, the EU can choose from a broader set of options owing to its unique position in global trade. We are the top trading partner for over 70 nations and we continue to strike new agreements, most recently with 400 million Latin Americans. And in a deal with the EU, what you see is what you get.
But these strengths are meaningless if Europe is hamstrung by its weaknesses. We need profound change on three fronts.
First, we need to make the EU an easier place for innovative companies to grow. Only one-third of university patents in Europe are commercialised, while companies that try to scale up in our Single Market face many internal barriers. Despite our savings, entrepreneurs lack access to risk capital, because capital markets are still too fragmented.
Second, we need to make Europe a better place to invest. Two out of three EU companies say that regulation is a key obstacle to investment, while just 14% of them are using AI. Firms still face long permitting procedures, onerous reporting requirements and diverging enforcement of digital rules.
Third, we need to make doing business in Europe cheaper, especially in terms of energy costs. While the shift to renewables creates good jobs and strengthens energy security and independence, it also comes with greater intermittency and greater energy losses through curtailment. For the benefits of decarbonisation to show up in companies’ bills, we need massive investment in grids and storage and smarter market design.
Europe has got the message. This week, the European Commission presented its Competitiveness Compass which sets out ambitious proposals to address these shortcomings. From now on, the EU will strive not only to lower the barriers facing companies, but also to ensure that they have the resources they need to thrive here – be it finance, compute, energy or skills.
For example, the Commission will propose a so-called “28th regime” for innovative companies, allowing them to benefit from a single legal framework across the EU for aspects of corporate law, insolvency, labour law and taxation. It will launch a plan for a Savings and Investments Union, which will ensure that innovative companies can find the financial backing they need.
The EU will also give companies access to our world-leading network of supercomputers. This will help develop new advanced technologies and spread AI faster among established champions. The ECB will play its part too by keeping Europe at the forefront of digital payment technologies, including through the digital euro project.
In parallel, the regulatory burden will be lightened by an unprecedented simplification effort, starting next month. This will include a far-reaching simplification of legislation on sustainable finance reporting and due diligence. And energy prices will be brought down through a range of measures to integrate markets, increase contracted energy and reduce taxes.
This is only a snapshot of what lies ahead. Companies and households want to see action – and a wave of actions are coming. We can no longer squander our strengths with self-imposed handicaps. There is too much at stake. We are ready to do whatever is necessary to bring Europe back on track.
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As of Sunday, 2 February, the first rules under the Artificial Intelligence Act (AI Act) started to apply. This includes the AI system definition, AI literacy, as well as a very limited number of prohibited AI use cases outlined in the AI Act that pose unacceptable risks in the EU.
To facilitate innovation in AI, the Commission will publish guidelines on AI system definition. This aims to assist the industry in determining whether a software system constitutes an AI system.
The Commission will also release a living repository of AI literacy practices gathered from AI systems’ providers and deployers. This will encourage learning and exchange among them while ensuring that users develop the necessary skills and understanding to effectively use AI technologies.
To help ensure compliance with the AI Act, the Commission will publish guidelines on the prohibited AI practices that are posing unacceptable risks to citizens’ safety and fundamental rights.
These guidelines will explain the legal concepts and provide practical use cases, based on stakeholder input. They are not binding and will be updated as necessary. The Commission has launched several initiatives to promote innovation in AI, from the AI innovation package supporting startups and SMEs to the upcoming AI Factories which will provide access to the massive computing power that start-ups, industry and researchers need to develop their AI models and systems.
More information and the guidelines will be available here.
(For more information: Thomas Regnier — Tel.: + 32 2 299 10 99; Nika Blazevic — Tel. + 32 2 299 27 17) 
 
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Today, the Commission presents the Competitiveness Compass, the first major initiative of this mandate providing a strategic and clear framework to steer the Commission’s work.
The Compass sets a path for Europe to become the place where future technologies, services, and clean products are invented, manufactured, and put on the market, while being the first continent to become climate neutral.
Over the last two decades, Europe has not kept pace with other major economies due to a persistent gap in productivity growth. The EU has what is needed to reverse this trend with its talented and educated workforce, capital, savings, Single Market, unique social infrastructure, provided it acts urgently to tackle longstanding barriers and structural weaknesses that hold it back.
President of the European Commission, Ursula von der Leyen, said: “Europe has everything it needs to succeed in the race to the top. But, at the same time, we must fix our weaknesses to regain competitiveness. The Competitiveness Compass transforms the excellent recommendations of the Draghi report into a roadmap. So now we have a plan. We have the political will. What matters is speed and unity. The world is not waiting for us. All Member States agree on this. So, let’s turn this consensus into action.”
Three core areas for action: innovation, decarbonisation and security
The Draghi Report identified three transformational imperatives to boost competitiveness, and the Compass sets out an approach and a selection of flagship measures to translate each of these imperatives into reality:

Closing the innovation gap: The EU must reignite its innovation engine. We want to create a habitat for young innovative start-ups, promote industrial leadership in high growth sectors based on deep technologies and promote the diffusion of technologies across established companies and SMEs. In this respect, the Commission will propose ‘AI Gigafactories’ and ‘Apply AI‘ initiatives to drive development and industrial adoption of AI in key sectors. It will table action plans for advanced materials, quantum, biotech, robotics and space technologies. A dedicated EU Start-up and Scale-up Strategy will address the obstacles that are preventing new companies from emerging and scaling up. A proposal for a 28th legal regime will simplify applicable rules, including relevant aspects of corporate law, insolvency, labour and tax law, and reduce the costs of failure. This will make it possible for innovative companies to benefit from one single set of rules wherever they invest and operate in the Single Market.

A joint roadmap for decarbonisation and competitiveness: The Compass identifies high and volatile energy prices as a key challenge and sets out areas for intervention to facilitate access to clean, affordable energy. The upcoming Clean Industrial Deal will set out a competitiveness-driven approach to decarbonisation, aimed at securing the EU as an attractive location for manufacturing, including for energy intensive industries, and promoting clean tech and new circular business models. An Affordable Energy Action Plan will help bring down energy prices and costs, while an Industrial Decarbonisation Accelerator Act will extend accelerated permitting to sectors in transition. In addition, the Compass foresees tailor-made action plans for energy intensive sectors, such as steel, metals, and chemicals, sectors which are the backbone of the European manufacturing system, but are the most vulnerable in this phase of the transition.

Reducing excessive dependencies and increasing security. The EU’s ability to diversify and reduce dependencies will hinge on effective partnerships. The EU already has the largest and fastest growing network of trade agreements in the world covering 76 countries that account for almost half of the EU’s trade. To keep diversifying and strengthening our supply chains, the Compass refers to a new range of Clean Trade and Investment Partnerships to help secure supply of raw materials, clean energy, sustainable transport fuels, and clean tech from across the world. Within the internal market, the review of the Public Procurement rules will allow for the introduction of a European preference in public procurement for critical sectors and technologies.

Five horizontal enablers for competitiveness
The three pillars are complemented by five horizontal enablers, which are essential to underpin competitiveness across all sectors:

Simplification: This enabler aims at reducing drastically the regulatory and administrative burden. It also involves a systematic effort to make procedures for accessing EU funds and getting EU administrative decisions simpler, faster, and lighter. The upcoming Omnibus proposal will simplify sustainability reporting, due diligence, and taxonomy. Furthermore, the Commission will facilitate doing business for thousands of small mid-cap companies. The Compass sets a target of cutting by at least 25% the administrative burden for firms and by at least 35% for SMEs.

Lowering barriers to the Single Market: For 30 years, the Single Market has been Europe’s tried and tested engine for competitiveness. To improve its functioning across all industries, a Horizontal Single Market Strategy will modernise the governance framework, removing intra-EU barriers and preventing the creation of new ones. In addition, the Commission will take the opportunity to make standard-setting processes faster and more accessible, in particular for SMEs and start-ups.

Financing competitiveness. The EU lacks an efficient capital market that turns savings into investments. The Commission will present a European Savings and Investments Union to create new savings and investment products, provide incentives for risk capital, and ensure investments flow seamlessly across the EU. A refocused EU budget will streamline access to EU funds in line with EU priorities.

Promoting skills and quality jobs. The foundation of Europe’s competitiveness is its people. To ensure a good match between skills and labour market demands, the Commission will present an initiative to build a Union of Skills focusing on investment, adult and lifelong learning, future-proof skills creation, skill retention, fair mobility, attracting and integrating qualified talent from abroad and the recognition of different types of training to enable people to work across our Union.

Better coordination of policies at EU and national level. The Commission will introduce a Competitiveness Coordination Tool, which will work with Member States to ensure implementation at EU and national level of shared EU policy objectives, identify cross-border projects of European interest, and pursue related reforms and investments. In the next Multiannual Financial Framework, a Competitiveness Fund will replace multiple existing EU financial instruments with similar objectives, providing financial support to the implementation of actions under the Competitiveness Coordination Tool.

Background
On 27 November 2024, President von der Leyen announced a Competitiveness Compass as the first major initiative of the Commission in this mandate, building on the Draghi report and providing the framework for the Commission’s work on competitiveness in this mandate.
In her State of the European Union Speech of 2023, President von der Leyen announced to have asked former Italian Prime Minister Mario Draghi to prepare a report on the future of European Competitiveness. The Report warns that Europe will no longer be able to rely on many of the factors that have supported growth in the past. It lays out a clear diagnosis and provides concrete recommendations to put Europe onto a different trajectory.  Many of the recommendations are already reflected in the Political Guidelines and mission letters by the President to the members of the College.
 
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Good afternoon, the Vice-President and I welcome you to our press conference.
The Governing Council today decided to lower the three key ECB interest rates by 25 basis points. In particular, the decision to lower the deposit facility rate – the rate through which we steer the monetary policy stance – is based on our updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission.
The disinflation process is well on track. Inflation has continued to develop broadly in line with the staff projections and is set to return to our two per cent medium-term target in the course of this year. Most measures of underlying inflation suggest that inflation will settle at around our target on a sustained basis. Domestic inflation remains high, mostly because wages and prices in certain sectors are still adjusting to the past inflation surge with a substantial delay. But wage growth is moderating as expected, and profits are partially buffering the impact on inflation.
Our recent interest rate cuts are gradually making new borrowing less expensive for firms and households. At the same time, financing conditions continue to be tight, also because our monetary policy remains restrictive and past interest rate hikes are still transmitting to the stock of credit, with some maturing loans being rolled over at higher rates. The economy is still facing headwinds but rising real incomes and the gradually fading effects of restrictive monetary policy should support a pick-up in demand over time.
We are determined to ensure that inflation stabilises sustainably at our two per cent medium-term target. We will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance. In particular, our interest rate decisions will be based on our assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission. We are not pre-committing to a particular rate path.
The decisions taken today are set out in a press release available on our website.
I will now outline in more detail how we see the economy and inflation developing and will then explain our assessment of financial and monetary conditions.
Economic activity
The economy stagnated in the fourth quarter, according to Eurostat’s preliminary flash estimate. It is set to remain weak in the near term. Surveys indicate that manufacturing continues to contract while services activity is expanding. Consumer confidence is fragile, and households have not yet drawn sufficient encouragement from rising real incomes to significantly increase their spending.
Nevertheless, the conditions for a recovery remain in place. While the labour market has softened over recent months it continues to be robust, with the unemployment rate staying low, at 6.3 per cent in December. A solid job market and higher incomes should strengthen consumer confidence and allow spending to rise. More affordable credit should also boost consumption and investment over time. Provided trade tensions do not escalate, exports should support the recovery as global demand rises.
Fiscal and structural policies should make the economy more productive, competitive and resilient. We welcome the European Commission’s Competitiveness Compass, which provides a concrete roadmap for action. It is crucial to follow up, with further concrete and ambitious structural policies, on Mario Draghi’s proposals for enhancing European competitiveness and on Enrico Letta’s proposals for empowering the Single Market. Governments should implement their commitments under the EU’s economic governance framework fully and without delay. This will help bring down budget deficits and debt ratios on a sustained basis, while prioritising growth-enhancing reforms and investment.
Inflation
Annual inflation increased to 2.4 per cent in December, up from 2.2 per cent in November. As in the previous two months, the increase was expected and primarily reflected past sharp drops in energy prices falling out of the calculation. Along with a month-on-month increase in December, this led energy prices slightly higher on an annual basis, after four consecutive declines. Food price inflation edged down to 2.6 per cent and goods inflation to 0.5 per cent. Services inflation edged up to 4.0 per cent.
Most underlying inflation indicators have been developing in line with a sustained return of inflation to our medium-term target. Domestic inflation, which closely tracks services inflation, has remained high, as wages and some services prices are still adjusting to the past inflation surge with a substantial delay. At the same time, recent signals point to continued moderation in wage pressures and to the buffering role of profits.
We expect inflation to fluctuate around its current level in the near term. It should then settle sustainably at around the two per cent medium-term target. Easing labour cost pressures and the continuing impact of our past monetary policy tightening on consumer prices should help this process. While market-based indicators of inflation compensation have largely reversed the declines observed in the autumn, most measures of longer-term inflation expectations continue to stand at around 2 per cent.
Risk assessment
The risks to economic growth remain tilted to the downside. Greater friction in global trade could weigh on euro area growth by dampening exports and weakening the global economy. Lower confidence could prevent consumption and investment from recovering as fast as expected. This could be amplified by geopolitical risks, such as Russia’s unjustified war against Ukraine and the tragic conflict in the Middle East, which could disrupt energy supplies and further weigh on global trade. Growth could also be lower if the lagged effects of monetary policy tightening last longer than expected. It could be higher if easier financing conditions and falling inflation allow domestic consumption and investment to rebound faster.
Inflation could turn out higher if wages or profits increase by more than expected. Upside risks to inflation also stem from the heightened geopolitical tensions, which could push energy prices and freight costs higher in the near term and disrupt global trade. Moreover, extreme weather events, and the unfolding climate crisis more broadly, could drive up food prices by more than expected. By contrast, inflation may surprise on the downside if low confidence and concerns about geopolitical events prevent consumption and investment from recovering as fast as expected, if monetary policy dampens demand by more than expected, or if the economic environment in the rest of the world worsens unexpectedly. Greater friction in global trade would make the euro area inflation outlook more uncertain.
Financial and monetary conditions
Market interest rates in the euro area have risen since our December meeting, partly mirroring higher rates in global financial markets. While financing conditions remain tight, our interest rate cuts are gradually making it less expensive for firms and households to borrow.
The average interest rate on new loans to firms declined to 4.5 per cent in November, while the cost of issuing market-based debt remained at 3.6 per cent. The average rate on new mortgages edged down to 3.5 per cent.
Growth in bank lending to firms rose to 1.5 per cent in December, up from 1.0 per cent in November, amid a strong monthly flow. Growth in debt securities issued by firms moderated to 3.2 per cent in annual terms. Mortgage lending continued to rise gradually but remained muted overall, with an annual growth rate of 1.1 per cent.
Credit standards for business loans tightened again in the fourth quarter of 2024, having broadly stabilised over the previous four quarters, as reported in our latest bank lending survey. The renewed tightening mainly reflected banks becoming more concerned about the risks faced by their customers and less willing to take on risks themselves. Demand for loans by firms increased slightly in the fourth quarter but remained weak overall. Credit standards for mortgages were broadly unchanged, after three quarters of easing, while the demand for mortgages again increased strongly, mainly because of more attractive interest rates.
Conclusion
The Governing Council today decided to lower the three key ECB interest rates by 25 basis points. In particular, the decision to lower the deposit facility rate – the rate through which we steer the monetary policy stance – is based on our updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission. We are determined to ensure that inflation stabilises sustainably at our two per cent medium-term target. We will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance. In particular, our interest rate decisions will be based on our assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission. We are not pre-committing to a particular rate path.
In any case, we stand ready to adjust all of our instruments within our mandate to ensure that inflation stabilises sustainably at our medium-term target and to preserve the smooth functioning of monetary policy transmission.
We are now ready to take your questions.
 
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A Balanced Partnership
HR/VP Kallas discussed EU-U.S. cooperation on global issues with U.S. Secretary of State Marco Rubio. The EU-U.S. trade balance is well balanced, both sides have complementary strengths.
800 Million Citizens
Our partnership is the world’s most extensive bilateral trade and investment relationship and our economies are integrated. Read the EU Ambassador Neliupšienė’s remarks to the press.
World Economic Forum
“European companies in the U.S. employ 3.5 million Americans. And another million American jobs depend directly on trade with Europe. Entire supply chains stretch on both sides of the Atlantic.” Learn more about the EU Competitiveness Compass.
— European Commission President Ursula von der Leyen
EU in Pennsylvania
Ambassador Neliupšienė visited Philadelphia to meet the Mayor and highlight the EU’s $72 billion investment in the state and the creation of over 250,000 jobs. We also hosted a group of students from the University of Pennsylvania!
American Farm Bureau Convention
In San Antonio, Texas, EU officials engaged with farmers and industry leaders to highlight innovation in agriculture and the importance of EU-U.S. cooperation.
Holocaust Remembrance Day
“We remember all the victims murdered during the Holocaust and mark the 80 years since the liberation of the Nazi concentration and extermination camp Auschwitz-Birkenau. This memory must be passed to future generations.”
—European Commission
We Stand with Ukraine
European Council President António Costa met President Zelenskyy and assured him of the EU’s support, including through sanctions against Russia.
Pints & Policy with the EU
Defense Attaché Henning Faltin and GMF Managing Director Kristine Berzina discussed the EU-U.S. security partnership and the EU’s vision for boosting its defense capabilities. Learn more.
Towards a Common Future
The future of the Western Balkans is with the European Union, so it is important that we remain in close contact with the Ambassadors. Thank you to Atlantic Council experts for their insights!
 
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Firms reported declining bank interest rates on loans, although indicating a slight further tightening of other lending conditions.
There was a slight increase in the bank financing gap compared with the previous quarter as firms reported a small reduction in bank loan availability and no change in the need for bank loans.
Firms’ inflation expectations increased slightly, with their median expectations for annual inflation in one, three and five years all standing at 3.0%, 0.1 percentage points higher across all three horizons.
Nearly half of the firms surveyed see the ECB’s inflation target at 2% and these firms have lower inflation expectations than those believing the target to be significantly higher.

In the most recent round of the Survey on the Access to Finance of Enterprises (SAFE), euro area firms reported a decrease in interest rates on bank loans (a net -4%, compared with a net 4% reporting an increase in the previous quarter), although a net 22% (30% in the previous quarter) observed increases in other financing costs (i.e. charges, fees and commissions) (Chart 1).
In this survey round, firms reported a small decline in the availability of bank loans in the fourth quarter of 2024 (a net -2%, down from a net 1% reporting an increase in the previous quarter) (Chart 2). At the same time, firms indicated no change in the need for bank loans, compared with 2% reporting a decrease in the third quarter of 2024. This led the financing gap – an index capturing the difference between the need for and availability of bank loans – to increase for a net 1% of firms, compared with a net 2% of firms reporting a decrease in the previous survey round. Looking ahead, firms expect small improvements in the availability of external financing over the next three months.
More firms perceived the general economic outlook to be the main factor hampering the availability of external financing than in the previous survey round (a net percentage of -22%, compared with -20%). A net 8% of firms indicated that their perception of banks’ willingness to lend, which may reflect banks’ risk aversion, had improved further (up from 6%).
A net 6% of enterprises reported an increase in turnover over the last three months, down from 7% in the previous survey round, with a net 11% of firms remaining optimistic about developments in the next quarter. An increased percentage of firms saw a deterioration in their profits compared with the previous survey round (a net percentage of -14%). The survey indicates that the net percentage of firms reporting an increase in cost pressures continued to decline.
Firms continued to expect the increase in their selling prices and wages to moderate over the next 12 months (Chart 3). Selling prices were expected to increase by 2.9% on average (down from 3.0% in the previous survey round), while the corresponding figure for wages was 3.3% (down from 3.5% in the previous round).
Firms’ inflation expectations increased slightly, bringing a halt to the previous declines (Chart 4). Median expectations for annual inflation in one, three and five years all stood at 3.0%, thus increasing by 0.1 percentage points for all three horizons. For inflation in five years, fewer firms reported balanced risks (33%). The increase in the percentage of firms seeing upside risks (51%, up from 46%) was similar to the rise in the share of those perceiving risks to the downside (16%, up from 12%).
To better understand firms’ awareness of and attention to inflation developments, a new set of ad hoc questions was introduced in this survey round. Firms were asked about the factors they believe influenced inflation in 2024, their level of attention to actual inflation, and how this attention has shifted compared with a year ago. Firms cited non-labour input costs rather than wage costs or profits as the primary factor influencing inflation in 2024. Additionally, firms were asked about the inflation target set by the European Central Bank (ECB). Nearly half of the firms surveyed see that target at 2%, and these firms have lower inflation expectations than those believing the target to be significantly higher than 2%.
The report published today presents the main results of the 33rdround of the SAFE survey for the euro area. The survey was conducted between 20 November and 18 December 2024. Firms were asked about conditions over the three-month period from October to December 2024. The sample comprised 5,393 enterprises in the euro area, of which 4,997 (93%) had fewer than 250 employees.
For media queries, please contact Nicos Keranis nicos.keranis@ecb.europa.eu, tel.: +49 172 758 7237.
Notes

The report on this SAFE survey round, together with the questionnaire and methodological information, is available on the ECB’s website.
Detailed data series for the individual euro area countries and aggregate euro area results are available on the ECB Data Portal.

Chart 1
Changes in the terms and conditions of bank financing for euro area enterprises

(net percentages of respondents)

Base: Enterprises that had applied for bank loans (including subsidised bank loans), credit lines, or bank or credit card overdrafts. The figures refer to pilot 2 and rounds 30 to 33 of the survey (October-December 2023 to October-December 2024).
Notes: Net percentages are the difference between the percentage of enterprises reporting an increase for a given factor and the percentage reporting a decrease. The data included in the chart refer to Question 10 of the survey.

Chart 2
Changes in euro area enterprises’ financing needs and the availability of bank loans

(net percentages of respondents)

Base: Enterprises for which the instrument in question is relevant (i.e. they have used it or considered using it). Respondents replying “not applicable” or “don’t know” are excluded. The figures refer to pilot 2 and rounds 30 to 33 of the survey (October-December 2023 to October-December 2024).
Notes: The financing gap indicator combines both financing needs and the availability of bank loans at firm level. The indicator of the perceived change in the financing gap takes a value of 1 (-1) if the need increases (decreases) and availability decreases (increases). If enterprises perceive only a one-sided increase (decrease) in the financing gap, the variable is assigned a value of 0.5 (-0.5). A positive value for the indicator points to a widening of the financing gap. Values are multiplied by 100 to obtain weighted net balances in percentages. The data included in the chart refer to Questions 5 and 9 of the survey.

Chart 3
Expectations for selling prices, wages, input costs and employees one year ahead, by size class

Base: All enterprises. The figures refer to rounds 29 to 33 (April-September 2023 to October-December 2024) of the survey, with firms’ replies collected in the last month of the respective survey waves.
Notes: Weighted average euro area firm expectations of changes in selling prices, wages of current employees, non-labour input costs and number of employees for the next 12 months using survey weights. The statistics are computed after trimming the data at the country-specific 1st and 99th percentiles. The data included in the chart refer to Question 34 of the survey.

Chart 4
Firms’ median expectations for euro area inflation by size class

(annual percentages)

Base: All enterprises. The figures refer to pilot 2 and rounds 30 to 33 (October-December 2023 to October-December 2024) of the survey, with firms’ replies collected in the last month of the respective survey waves.
Notes: Survey-weighted median of euro area firms’ expectations for euro area inflation in one year, three years and five years. The statistics are computed after trimming the data at the country-specific 1st and 99th percentiles. The data included in the chart refer to Question 31 of the survey.

 
Compliments of the European Central BankThe post ECB | Survey on the Access to Finance of Enterprises: firms report lower interest rates but a small decline in bank loan availability first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Governor Hochul announced two major initiatives to expand affordable digital access across New York State.

Governor Kathy Hochul today announced two major initiatives to expand digital access across New York State. The first initiative — Affordable Broadband Act (ABA) — has officially taken effect, making New York State the first state in the nation to require internet service providers to offer qualifying low-income households broadband service at $15 per month for 25 Mbps service or $20 for 200 Mbps service. Second, the State is also launching its $15.5 million Digital Equity Program Capacity Grant to provide two-year grants supporting digital literacy training, device access and support services for underserved communities. Additionally, to maximize the impact of this law and alongside its $15.5 million Request for Applications, ConnectALL will invest $3 million to publicize the ABA benefit to eligible households, support them in signing up for the low-cost accessibility option, and help them connect to education programs and affordable devices, while the Public Service Commission works to ensure all internet service providers fully comply with the law.
“Digital connectivity isn’t a luxury — it’s a fundamental right that opens doors to economic mobility and opportunity,” Governor Hochul said. “With the Affordable Broadband Act and this $15.5 million investment in our ConnectALL initiative, we’re taking bold steps to bridge the digital divide creating affordable, accessible and equitable internet for all New Yorkers. These efforts will ensure that families and businesses across New York have the tools they need to thrive in today’s digital world, while empowering local communities to create innovative solutions for long-term digital equity.”
Empire State Development President, CEO and Commissioner Hope Knight said, “Digital access and literacy are the gateway to economic mobility in today’s economy. This combined approach of affordable broadband access and digital inclusion resourcing will empower local organizations to develop innovative solutions that break down barriers. Through ConnectALL, we’re creating a digital ecosystem where every community can fully participate in our state’s economic growth and prosperity.
New York State Public Service Commission Chair Rory M. Christian said, “Broadband is as vital a resource as running water and electricity to New York’s communities. This law is crucial in fostering economic equity, supporting educational opportunities and promoting public health, especially as more essential services, including remote education and health care, are increasingly moving online.”
State Senator Kristen Gonzalez said, “As Chair of the Internet and Technology Committee, I’m proud to see this investment in affordable broadband across our state. This brings us a step closer to securing the right to internet access for all New Yorkers. I commend Governor Hochul for her leadership on this vital issue, and support continued efforts to increase broadband speeds and further expand tech access in our state.”
Assemblymember Steve Otis said, “Congratulations to Governor Hochul and the team at ESD’s ConnectALL office on the launch of this Digital Equity Grant opportunity to support local programs that deliver digital training, device access and support services to those left out of today’s digital world. These grants will allow local providers of these programs to expand their work and bring more individuals across the digital divide. These programs have been a priority for the State Legislature and digital inclusion practitioners for several years. The grants are the next step in the implementation of ConnectAll’s highly regarded Digital Equity Plan.
First-in-the-Nation Affordable Broadband Act Guarantees $15 Broadband Access Statewide
The Affordable Broadband Act, enacted in 2021, recently cleared final legal hurdles when the United States Supreme Court denied further review of the law in December 2024, allowing implementation to proceed. The ABA requires internet providers serving over 20,000 customers to offer reduced-cost plans to qualifying households. The Public Service Commission (PSC) has reinstated temporary exemptions for small ISPs with fewer than 20,000 customers and will review new requests for exemptions based on economic hardship.
Under the ABA, qualifying New York households can access high-speed internet at two price points:

$15 per month for speeds of at least 25 megabits per second
$20 per month for high-speed service of at least 200 megabits per second

These discounted rates are permanent, though providers may adjust prices once every five years. Any price increase must be announced 30 days in advance to customers and regulators, and are limited to the lesser of either the most recent consumer price index change or a maximum of two percent per year.
New Yorkers can qualify for these low-income broadband plans if they participate in any of the following programs:

Free or reduced-priced lunch through the National School Lunch Program
Supplemental Nutrition Assistance Program
Medicaid
Senior citizen rent increase exemption
Disability rent increase exemption
Affordability benefit from a utility

ConnectALL’s commitment to public awareness and enrollment supports its adoption. As a first step in the implementation process, the Public Service Commission has restarted a process, which had been stayed by court order, to implement the ABA law, and its staff will review requests for exemptions from small ISPs that have fewer than 20,000 customers and can show economic hardship. Today, the PSC reinstated temporary exemptions previously provided to small ISPs that requested such relief in May 2021. With the resolution of the litigation, providers with more than 20,000 customers will need to comply with the ABA’s directives.
ConnectALL Digital Equity Program Capacity Grant: Applications Now Open
Empire State Development’s ConnectALL Office is accepting applications for the $15.5 million Digital Equity Program Capacity Grant. This competitive initiative will provide two-year grants to organizations and partnerships working to bridge the digital divide through high-quality digital literacy training, device access programs, digital privacy skills development and inclusive support services.
The RFA is funded through the National Telecommunications and Information Administration’s State Digital Equity Capacity Grant Program and aligns with New York State’s Digital Equity Plan. The funding follows NTIA’s approval of New York State’s Digital Equity Capacity Grant Application in October 2024, which secured nearly $36.9 million in federal funding. ConnectALL aims to double the capacity of New York State’s digital equity ecosystem by 2035. Apply for the Digital Equity Program Capacity Grant on Broadband’s website.
Proposals must be submitted by 11:59 PM ET on Monday, March 24 2025. To help organizations prepare their applications, ConnectALL will host an informational webinar on January 30, 2024. The complete RFA and webinar registration information are available at broadband.ny.gov.
Governor Hochul’s ConnectALL Initiative
Governor Hochul has made expanding broadband access a cornerstone of her administration’s efforts to create a more equitable New York. Through the ConnectALL initiative, New York State is investing $1 billion to transform the State’s digital infrastructure, enhance competition among providers and ensure that every New Yorker has access to reliable, affordable high-speed internet. To date, ConnectALL has overseen the successful launch and implementation of several programs to advance broadband access, including:

The Digital Equity Program will invest $50 million, including a federal allocation of at least $37 million to implement the New York State Digital Equity Plan to close the digital divide. The Plan outlines New York’s statewide strategy to increase its capacity to improve digital literacy and digital job readiness skills, facilitate access to affordable internet and devices, enhance digital privacy and safety, and make government services more accessible through the internet.

The Affordable Housing Connectivity Program is investing $100 million to bring new broadband infrastructure to serve low income households in affordable and public housing. The Program has so far awarded over $13 million and secured broadband service at $10 per month for over 14,000 homes in Bronx, Erie, Monroe and New York counties. The program is currently accepting applications from internet service providers and requests to participate from housing owners and public housing authorities.
The ConnectALL Deployment Program will fund internet service providers to reach unserved and underserved locations. ConnectALL released the program’s Request for Applications for about $664 million in December 2024, drawing on federal funding from the Broadband Equity, Access, and Deployment Program, as described in the ConnectALL Broadband Deployment Initial Proposal.
The Municipal Infrastructure Program has awarded over $214 million for the construction of publicly-owned broadband infrastructure and delivery of affordable broadband service across the State. The program, primarily funded by the U.S. Department of the Treasury under the American Rescue Plan’s Capital Projects fund, facilitates a variety of models of municipal broadband, public-private partnerships, and open access networks to provide New Yorkers with affordable, high-quality service options. The Beta ConnectALL Projects Dashboard provides details on projects funded by the Municipal Infrastructure Program.

 
Compliments of the New York State Governor’s OfficeThe post New York State Governor | Governor Hochul Announces Major Digital Access Initiatives With Launch of Affordable Broadband Act and $18.5 Million ConnectALL Investment first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.