In an interview with the Financial Times, ECB President Christine Lagarde proposed a measured approach to handling U.S. President-elect Donald Trump’s tariff threats, favoring a “cheque book strategy” over outright retaliation.

Trump has outlined plans for sweeping tariffs, including a 60% levy on Chinese goods and a 10-20% range on imports from other countries, including Europe. Lagarde interpreted the range as a negotiating tactic, suggesting Trump is “open to discussion.”

Lagarde expressed preference for a “cheque book strategy” over a “pure retaliation strategy.” She explained that Europe could offer to purchase certain US goods and signal readiness for constructive dialogue.

“This is a better scenario than a pure retaliation strategy, which can lead to a tit-for-tat process where no one is really a winner,” she stated.

On the inflationary effects of tariffs, Lagarde admitted the outcome remains uncertain. She explained that the net impact on inflation would depend on various factors, including GDP shifts, currency movements, the specific goods targeted, and the duration of the tariffs.

“If anything, maybe it’s a little net inflationary in the short term,” she remarked, but emphasized the difficulty of forming a conclusive view without further details.

Full interview of ECB’s Lagarde here.

ECB Executive Board member Isabel Schnabel stressed the importance of a cautious approach to monetary easing, warning against shifting policy into “accommodative territory.”

Speaking to Bloomberg, Schnabel stated that ECB could “gradually move toward neutral” if incoming data continue to align with the bank’s baseline projections. However, she rejected market expectations for accommodative policy, remarking, “From today’s perspective, I do not think that would be appropriate.”

Schnabel also dismissed speculation about larger rate moves, such as half-point cuts, expressing “a strong preference for a gradual approach.”

She cautioned that cutting rates prematurely, even if inflation were to fall short, could be counterproductive if deeper structural issues underlie the economic weakness.

In her view, “the costs of moving into accommodative territory could be higher than the benefits,” particularly as it would deplete policy options needed for future shocks that monetary measures could address more effectively.

Schnabel estimates the neutral interest rate to fall within the 2% to 3% range. With the deposit rate currently at 3.25% after three quarter-point cuts this year, she noted, “we may not be so far” from neutrality now.

French ECB Governing Council member Francois Villeroy de Galhau highlighted the global economic risks stemming from US President-elect Donald Trump’s plans to increase tariffs and implement tax cuts. Speaking at a retail investor conference in Paris, Villeroy noted that these policies could raise inflation in the US while dampening growth internationally.

While Villeroy acknowledged that the inflationary impact on Europe would likely be “relatively limited,” he emphasized the influence on European long-term interest rates.

“Long-term interest rates set by the market have a certain tendency to cross the Atlantic,” he remarked, suggesting that US policy changes could indirectly affect Eurozone markets.

“I don’t think it changes much for European short-term rates, but long-term rates could see a transition effect,” he noted.

In an interview with Helsingin Sanomat, ECB Vice President Luis de Guindos acknowledged the shifting priorities of the ECB as inflation continues to decline.

Inflation is expected to return to the medium-term target of 2% by 2025. At the same time, economic growth remains very weak. So “concerns about high inflation have shifted to economic growth”. he said.

Additionally, he highlighted the rising challenges posed by “geopolitical risks” and uncertainty surrounding US. trade and fiscal policies, which could have broader implications for the Eurozone economy.

Looking ahead, ECB’s December projections will offer further clarity, but De Guindos reiterated that if current forecasts hold, the central bank will “continue making our monetary policy stance less restrictive.”

De Guindos stressed the importance of a cautious, data-driven approach in such uncertain conditions, noting that “it’s difficult to make predictions about the specific number and size of rate cuts.” However, with inflation moving closer to the medium-term target, ECB appears set to maintain its easing bias.

Full interview of ECB’s de Guindos here.