ECB President Christine Lagarde told a European Parliament’s committee that the Eurozone’s “disinflationary process is over”, with inflation now hovering around 2% and expected to remain near target over the medium term. She said this backdrop justified the Governing Council’s recent decision to keep interest rates unchanged.
Lagarde noted that risks to economic growth have become “more balanced”, as the likelihood of severe tariff-related downside shocks has eased following the trade deal. Still, she warned that renewed trade tensions could weigh on exports, investment, and consumption, while persistent geopolitical uncertainty continues to cloud the outlook for both growth and prices. On the positive side, Lagarde highlighted that higher defence and infrastructure spending and productivity-boosting reforms could support growth momentum ahead.
She also emphasized that the inflation outlook remains “more uncertain than usual”, reflecting the “still volatile global trade policy environment” that poses both upside and downside risks. However, she added that the “range of risks on both sides has narrowed” as new data arrives.
Her comments are interpreted as confirmation that the ECB remains firmly on hold, awaiting clearer signals before considering any recalibration of its policy stance.
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