ECB Lagarde “Rate cut stance appropriate… Prepared for uncertainties”

Interest rate policy of Europe decoupled from the United States (Source: Reuters)

The European Central Bank (ECB) announced that it has moved closer to achieving its inflation target through recent base rate cuts and is well-prepared for future economic uncertainties. Christine Lagarde, President of the ECB, stated in an interview with Monaco Broadcasting on the 8th (local time) that “ECB’s monetary policy is well-coordinated, and we are in a good position to respond during this sensitive and uncertain period.”

The ECB has lowered the base rate by 200bp over the past year in a total of 8 times, and the market’s prevailing view is that this cycle is in the final stages. Lagarde expressed confidence, stating, “The conditions for policy to achieve medium-term inflation targets have already been established.”

In its economic outlook announced on the 6th, the ECB projected that the Eurozone inflation rate will fall to 1.6% by 2026 and reach the target of 2% by 2027. The Eurozone growth rate is also expected to show a gradual recovery trend.

There is an atmosphere of consensus forming between doves and hawks within the ECB. Governor Yannis Stournaras of the Central Bank of Greece stated, “The threshold for additional cuts is now high,” and Governor Boris Vujčić of the Croatian National Bank said, “ECB has nearly reached it.”

However, President Lagarde recently warned of the possibility that the United States may impose a 50% tariff on European products, which “could cause significant damage to international trade.” This is a risk not yet reflected in the official ECB economic outlook, which could impact future monetary policy.

Lagarde emphasized, “The Euro has endured very well and stabilized inflation, which exceeded 10%, to the target level of 2%,” and stated that the ECB will continue to pursue flexible rate adjustments centered on indicators.