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After the surge in inflation in 2021-2023, the return to price stability and a more challenging global environment have altered the monetary picture and present the ECB with new questions. In this paper, we discuss three of them: how to define an ‘equilibrium’ monetary stance; how to deal with divergent national inflation rates; and how to navigate the forces shaping global exchange rates, in particular the euro’s. We assess the current ECB monetary stance to be broadly adequate, but we see challenges both in the persistence of cross-country inflation rate differences and in the appreciation of the euro. 

 

This paper was prepared at the request of the ECON Committee of the European Parliament. 

The Brand Group Core within the Volkswagen Group – the organizational unit including the volume brands Volkswagen, Škoda, SEAT&CUPRA and Volkswagen Commercial Vehicles – is strategically reorienting its production and establishing a high-performance regional production network.

As a first step, André Kleb, to date Head of Planning and Production Technology of the Volkswagen brand, is to assume responsibility for the regional management of production and logistics as the Chief Production Officer for the Iberian Peninsula with effect from January 1, 2026. In the spirit of overall cross-brand responsibility, this newly created function will report to Christian Vollmer, Member of the Board of Management for Production & Logistics of the Volkswagen brand and member of the extended Group Executive Board, and also to Markus Haupt, CEO SEAT&CUPRA.

The new structure for the Iberian Peninsula will include all the plants of the Volkswagen Group in Spain and Portugal. Overarching functions such as central planning, production steering, project and start-of-production management as well as logistics will be anchored within the regional management.

In connection with the reorganization, Thomas Hegel Gunther, currently Managing Director and plant manager of Volkswagen Autoeuropa, is to succeed André Kleb as new Head of Planning and Production Technology of the Volkswagen Passenger Cars brand in Wolfsburg.

Anabel Andión Lomero, to date the Head of the Pre-Series Center at SEAT&CUPRA in Spain, will become Managing Director and plant manager of Volkswagen Autoeuropa in Portugal with effect from March 1, 2026.

27 November 2025

Components of the broad monetary aggregate M3

The annual growth rate of the broad monetary aggregate M3 stood at 2.8% in October 2025, unchanged from the previous month, averaging 2.9% in the three months up to October. The components of M3 showed the following developments. The annual growth rate of the narrower aggregate M1, which comprises currency in circulation and overnight deposits, increased to 5.2% in October from 5.0% in September. The annual growth rate of short-term deposits other than overnight deposits (M2-M1) was -1.8% in October, compared with -2.1% in September. The annual growth rate of marketable instruments (M3-M2) decreased to 1.9% in October from 4.3% in September.

Data for monetary aggregates

Looking at the components’ contributions to the annual growth rate of M3, the narrower aggregate M1 contributed 3.3 percentage points (up from 3.1 percentage points in September), short-term deposits other than overnight deposits (M2-M1) contributed -0.5 percentage points (up from -0.6 percentage points) and marketable instruments (M3-M2) contributed 0.1 percentage points (down from 0.3 percentage points).

Among the holding sectors of deposits in M3, the annual growth rate of deposits placed by households decreased to 3.0% in October from 3.2% in September, while the annual growth rate of deposits placed by non-financial corporations increased to 3.5% in October from 3.1% in September. Finally, the annual growth rate of deposits placed by investment funds other than money market funds decreased to 2.1% in October from 7.1% in September.

Counterparts of the broad monetary aggregate M3

The annual growth rate of M3 in October 2025, as a reflection of changes in the items on the monetary financial institution (MFI) consolidated balance sheet other than M3 (counterparts of M3), can be broken down as follows: claims on the private sector contributed 2.8 percentage points (up from 2.6 percentage points in September), net external assets contributed 1.7 percentage points (down from 1.8 percentage points), claims on general government contributed 0.2 percentage points (as in the previous month), longer-term liabilities contributed -1.0 percentage points (as in the previous month), and the remaining counterparts of M3 contributed -0.9 percentage points (down from -0.8 percentage points).

Data for contribution of the M3 counterparts to the annual growth rate of M3

Claims on euro area residents

The annual growth rate of total claims on euro area residents increased to 2.3% in October 2025 from 2.1% in the previous month. The annual growth rate of claims on general government stood at 0.7% in October, compared with 0.6% in September, while the annual growth rate of claims on the private sector increased to 2.9% in October from 2.7% in September.

The annual growth rate of adjusted loans to the private sector (i.e. adjusted for loan transfers and notional cash pooling) increased to 3.0% in October from 2.8% in September. Among the borrowing sectors, the annual growth rate of adjusted loans to households increased to 2.8% in October from 2.6% in September, while the annual growth rate of adjusted loans to non-financial corporations stood at 2.9% in October, unchanged from the previous month.

Data for adjusted loans to the private sector

Notes:

• Data in this press release are adjusted for seasonal and end-of-month calendar effects, unless stated otherwise.
• “Private sector” refers to euro area non-MFIs excluding general government.
• Hyperlinks lead to data that may change with subsequent releases as a result of revisions. Figures shown in annex tables are a snapshot of the data as at the time of the current release.

Summary of latest developments

In the second quarter of 2025, aggregated house prices adjusted for consumer prices declined by 0.8% yoy, slightly less compared with the 1.0% decline registered in the previous quarter.¹ Yet this marked the third consecutive year of falling property prices globally.

Diverging trends remained between AEs and EMEs, although the gap narrowed somewhat. Real house prices in AEs rose by 0.6% yoy, furthering their increase observed since 2024, despite some recent weakening compared with Q1 2025 (1.1%). In contrast, EMEs experienced a 1.9% yoy decline (versus –2.5% in Q1 2025), extending their downward trend that started in 2022 (Graph 1).

The decline in real house prices in EMEs (–1.9%) was primarily driven by Asia (–3.6%), while central and eastern Europe (3.0%) and Latin America (1.9%) recorded significant price growth. Turning to AEs, price increases occurred mainly in the euro area (3.1%) and other European countries (0.9%); in contrast, real prices fell moderately in non-European AEs (–0.8%) (Table 1).

Despite the decline observed in real house prices in global aggregated terms, jurisdiction-level data show that over 70% of AEs and 50% of EMEs experienced positive price growth (0–10%) in Q2 2025. Moreover, a small but significant proportion of economies experienced price increases above 10% (Graph 2.B). Reflecting the above, the median growth among the 57 reporting jurisdictions has remained in positive territory since the beginning of 2024 (+1.7% yoy in Q2 2025; Graph 2.A).²

Graph 3 highlights the most significant changes observed across jurisdictions in Q2 2025: real prices rose sharply yoy in North Macedonia (16%), Portugal (15%) and Bulgaria (11%), while the biggest declines were observed in Hong Kong SAR (–8%), China (–6%) and Canada (–5%).

Since the Covid-19 pandemic, global real residential property prices have increased by 3.5%. Among the G20 economies, they have risen by 112% in Türkiye and 20% in the United States and Mexico, and have decreased by 17% in China and 8% in South Africa.

From a longer-term perspective, real global prices have grown by 20.6% since the GFC, ie compared with their 2010 levels. They have more than doubled in Türkiye and risen by over 50% in India, the United States and Mexico. But they remain well below their 2010 levels in Italy (–25%), South Africa (–12%) and China (–9%) (Graph 4).

Advanced economies

In aggregate, real residential property prices in AEs rose by 0.6% yoy in Q2 2025, continuing the upward trend observed since Q2 2024.

Among this group, a significant increase was observed in Switzerland (5.0%), where real prices have risen steadily since 2024. The expansion has been more moderate in the euro area (3.1%), while developments have remained broadly flat in Japan (0.2%), the United Kingdom (–0.4%) and the United States (–0.8%). In contrast, real prices continued to fall markedly in Canada (–5.3%) (Graph 5).

In the euro area, real house prices grew by 3.1% in aggregate in Q2 2025, with some notable diversity among member jurisdictions. Portugal recorded the highest increase at 15% yoy, continuing a long-running trend, followed by Spain (10%), where prices have kept increasing for two consecutive years. Prices kept growing also in the Netherlands (6%) and Italy (2%). Germany saw the second consecutive quarter of moderate growth (1%) after an extended period of decline, and prices almost stabilised in France.

Emerging market economies

Real residential property prices in EMEs fell by 1.9% yoy in Q2 2025, reflecting a sharp decline in emerging Asia (–3.6%), with significant declines in Hong Kong SAR (–8%), China (–6%) and, to a lesser extent, Korea (–2%). Prices remained almost stable in India (1%) and Indonesia (–1%) and have risen somewhat in Thailand (3%). The Philippines recorded the highest increase in the region, at 6% (Graph 7).

Real house prices in Latin America grew by 1.9% yoy, primarily driven by Mexico, which recorded a 4% increase for five consecutive quarters, while prices in Brazil were stable.

In central and eastern Europe, prices increased by 3% yoy, with notable growth in North Macedonia (16%) and Bulgaria (11%). Prices slowed their decline in Türkiye (–2.5%).

Prices were stable in the Middle East and Africa region (–0.1%) and in particular stabilised in South Africa for the first time since 2022 (Graph 8).

Annex A: Nominal house price developments