Key takeaways from the ECB May 2025 Financial Stability Review

Geopolitical and policy uncertainty have surged further since the ECB’s November 2024 FSR. Uncertainty stems from several policy areas, including trade, regulatory and fiscal policies. Unpredictability of a broad range of US policies triggered significant volatility in financial markets. Protectionist responses might escalate into a fully-fledged global trade war with adverse repercussions on global growth, inflation and asset prices. Markets are highly sensitive to tariff-related news. This might lead to a prolonged period of high asset price volatility and market fragility. At the same time, there are indications of a redirection of financial flows from the U.S. towards the euro area, which is also reflected in exchange rate developments. What are the risks of financial market adjustments becoming disorderly? What if the fallout of the trade conflict triggers a deterioration of household and firm creditworthiness? And how about risks from public debt sustainability in this challenging environment? This SUERF BAFFI Bocconi e-lecture offers the opportunity to discuss with the ECB’s mastermind behind the ECB FSR on the latest ECB thinking on these important themes. Two renowned financial stability experts from the central banking community will discuss and complement the ECB’s analysis.

The Financial Stability Review provides an overview of potential risks to financial stability in the euro area. It aims to promote awareness in the financial industry and among the public of euro area financial stability issues. It is published twice a year, with the next release provisionally set for 21 May 2025.