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Ms Schnabel started her presentation by noting that, since the Governing Council’s previous monetary policy meeting on 29-30 October 2025, the financial market narrative that ECB interest rates were in a good place had been further consolidated. Incoming data had reinforced expectations that inflation would remain close to the 2% target over the medium term and that the euro area economy would grow at a rate near potential. On the back of the resilient economy and stickier services inflation, expectations of further rate cuts had vanished, with both markets and survey participants expecting policy rates to remain at their current levels for an extended period. Better than expected macroeconomic data and the reappraisal of monetary policy expectations had also pushed longer-term risk-free rates higher, a development driven by real rates, while the euro exchange rate had remained within a narrow range. Strong global risk sentiment had kept equity markets at high levels, while sovereign and corporate bond spreads had remained compressed and volatility in euro area money markets had remained limited. Overall, euro area financial conditions had tightened slightly since October 2025 but had fluctuated in a narrow range since the ECB’s last rate cut in June 2025, remaining closely aligned with its key policy rates. ECB ACCOUNTS: THE VIEW WAS EXPRESSED THAT MAINTAINING INTEREST RATES AT THEIR CURRENT LEVEL REPRESENTED A FAIRLY SOLID PATH UNDER THE BASELINE OUTLOOK ECB ACCOUNTS: THE DECEMBER STAFF PROJECTIONS HAD STRENGTHENED CONFIDENCE IN THE MEDIUM-TERM OUTLOOK - EURO AREA ECONOMIC ACTIVITY WAS PROVING MORE RESILIENT THAN PREVIOUSLY ANTICIPATED - THE INFLATION OUTLOOK CONTINUED TO BE IN A GOOD PLACE ECB ACCOUNTS: MOST MEMBERS VIEWED THE RISKS SURROUNDING THE INFLATION OUTLOOK AS TWO-SIDED, WITH SOME MEMBERS JUDGING THAT THE DISTRIBUTION OF RISKS HAD SHIFTED UP