ECB President Christine Lagarde said in a speech today the central bank is “in a good place” as the inflation shock of recent years has largely faded in the Eurozone. She cited three additional reasons underpinning the current stance: trade shocks are “not creating new inflationary pressures”, inflation risks are “quite contained in both directions,” and with policy rates at 2%, the ECB is “well placed” to respond if circumstances change.
Lagarde noted that the ECB is not facing the “classic policy trade-off” of slowing growth and rising inflation. Instead, risks appear balanced, allowing policymakers more space to focus on stabilizing the medium-term outlook.
Still, she cautioned that uncertainty persists. Companies are still adjusting to US tariffs by running down inventories and absorbing higher costs in margins, leaving the full impact on prices and growth unclear. She also acknowledged that in a world of shifting geopolitics, “unknown unknowns” will continue to shape the policy environment.
Lagarde emphaized that the ECB cannot pre-commit to any rate path, stressing the need to remain agile and data-dependent.
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