ECB Holds Rates Steady Amid Inflation Cooldown as Novo Banco Faces Corruption Probe in Portugal

The European Central Bank (ECB) has maintained its key interest rates steady, indicating confidence in the economic course of the eurozone amid lingering uncertainties. Having witnessed inflation gradually eased, policymakers chose not to further tighten, pointing to data-driven approach in the coming days.

The action comes amid the ECB's having to deal with a complex setting of geopolitics tensions, uncertainty in energy markets, and subdued consumer sentiment. Officials indicated that inflation has eased but there are still risks to growth, particularly from the external side and soft demand. The ECB reiterated its commitment to providing price stability and indicated that rates will be maintained at current levels for a "sufficiently long duration" to anchor inflation expectations.

In Portugal, the country's fourth-largest bank, Novo Banco, has been probed following a high-profile police crackdown. Police stormed the headquarters of the bank and the domestic office of a worldwide auditor's firm as part of an on-going money laundering and corruption investigation. The probe targets the disposals of assets within Novo Banco since 2018 and allegations of aggravated fraud and corruption of the private sector.

The bank, which was spun off from the now-defunct Banco Espírito Santo in 2014 and sold to a French banking group this year, has been restructuring through asset disposals and stripping of risk. The investigation had over 100 inspectors and targeted various sites, from private homes to corporate offices. While the auditing firm said its offices were raided, it added it was not the focus of the investigation and is cooperating fully.

These trends serve to point up the delicate balance European financial institutions must walk—between domestic solvency and global economic pressures—as they experience a post-crisis recovery.