ECB President Lagarde: Not Pre-commit to a Rate Path but Follow a Data-dependent Approach

Remarks of Officials

Central Bank

Summary:

Christine Lagarde, president of the European Central Bank President (ECB) said at a press conference on Thursday that economic activity has been somewhat weaker than expected. The latest data points to weaker growth and downside risks to growth. The disinflation process is well on track, but wage pressures remain strong. Inflation is expected to rise in the coming months before falling back to target levels next year.

Following the European Central Bank (ECB)'s October policy meeting, ECB President Christine Lagarde held a press conference to address questions from journalists. The main points are as follows:

Q1: Does the decision to cut today really represent a shift of gear? Do you expect a cut at every meeting for the next few meetings now to be the most likely scenario?

A: We decided to cut all our rates by 25 basis points because we believe that the disinflationary process is well on track and the inflation data that we received in the last five weeks since our last monetary policy decision was heading in the lower direction. The ECB will continue to be data dependent and the rate cuts decision in October is a case in point of us being data dependent.

Q2: Can you elaborate on how you think a return of Donald Trump to the White House and his plan to impose tariffs will alter the outlook for growth and inflation in the euro area?

A: Trade is obviously an important element and as part of the drivers of activity going forward. For an economy like the European economy, any hardening of the barriers, the tariffs, the additional obstacles to that possibility to trade with the rest of the world is obviously a downside.

Q3: You were now referring to and pointing out that the economy doesn't really look great and all signs point towards more downspin. Why didn't you go for a 50 basis point cut? And have you been discussing the topic of the possibility that inflation could also undershoot, if you keep your policy stance restrictive?

A: The economic activity has been somewhat weaker than expected, and clearly December will be another opportunity for us. Our Chief Economist Philip Lane proposed a 25 basis point cut. We thought that it was the appropriate decision to make in view of the moment, in view of the indicators that we have and our assessment of this disinflationary process that is really under way and well on track. For the inflation, what is clear to all is that we still have risks on both sides of our forecast, upside and downside. Economic forecasts will be updated by December, and there will be no further comments until then.

Q4: You said earlier we will have more data in December, you will just have opened the door widely for a new rate cut in December if I interpret you well?

A: It is a fact that at each projection exercise, we receive more data. As I said, I did not open the door to anything. Hence we will be data dependent, and make decisions using meeting-by-meeting approach. As I said, we are not pre-committing.

Q5: Am I correct to see that perhaps your attention has shifted slightly from inflation concerns to growth concerns? Are we still in anticipation of a soft landing? When will the restrictive interest rate level turn easing?

A: The euro area, on the basis of what we have, is not heading for a recession. We are more concerned about growth to the extent that it has an impact on inflation. We are determined to ensure that inflation returns to our 2% medium-term target in a timely manner, and this has to be sustainable. The eurozone policy rate is now restrictive, and the time point for achieving the inflation policy target has been brought forward, but it is clearly not now.

Q6: Is there any updated assessment of your inflation outlook? Even with interest rate cuts, financial conditions will remain restrictive. Will recent macroeconomic data lead to a downward revision in the December growth rate?

A: The current data suggests that our monetary policy is working. And we've managed to bring inflation down as we have so far, not to a complete victory. Our current assessment of inflation is based on all available data. I can't tell you what we expect for December, which we will continue to rely on data.

Lagarde's Press Conference

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ECB President Lagarde: Not Pre-commit to a Rate Path but Follow a Data-dependent Approach

Lagarde's Press Conference

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Recent Searches

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ECB President Lagarde: Not Pre-commit to a Rate Path but Follow a Data-dependent Approach

Lagarde's Press Conference﻿

Risk Disclosure

Lagarde's Press Conference