In a statement to the International Monetary and Financial Committee at the IMF Spring Meetings, European Central Bank President Christine Lagarde linked the worsening trade environment and rising tariff uncertainty to weaker investment and a more uncertain inflation outlook. She confirmed that the Governing Council cut the three key ECB interest rates by 25 basis points in April, described the euro area disinflation process as “well on track”, and reiterated that policy decisions will remain data-dependent and taken meeting by meeting without pre-committing to a rate path. Lagarde reported euro area real GDP growth of 0.9% in 2024 and pointed to moderate growth in the first quarter of 2025 amid exceptional uncertainty, with exporters facing new barriers and financial market tensions weighing on investment and consumption. Annual inflation was 2.2% in March 2025, with lower energy inflation, easing core inflation and a marked moderation in services inflation, while trade disruptions and geopolitical developments were presented as two-sided inflation risks. On financial stability, she noted that euro area banks are entering the period with robust capital and liquidity, while non-bank financial intermediation continues to carry elevated liquidity vulnerabilities and pockets of high leverage, supporting calls to maintain macroprudential requirements, implement the Basel framework, and strengthen non-bank resilience in line with Financial Stability Board recommendations. She also said crypto-asset risks to euro area financial stability appear limited for now but could grow with further expansion and interconnectedness, arguing for global implementation of the G20 crypto-asset roadmap alongside continued vigilance as the EU implements the Markets in Crypto-Assets Regulation. The statement also called for rapidly establishing a legislative framework to prepare for the potential introduction of a digital euro and positioned it as a way to provide a secure, universally accepted digital payment option while reducing dependence on foreign payment providers. On payments infrastructure, the Eurosystem’s TARGET Instant Payment Settlement service can now settle instant payments in Danish kroner in addition to euro and Swedish kronor, and work is under way to explore technical links with other fast payment systems and to support a TIPS-based instant, multi-currency payment system for the Western Balkans via Banca d’Italia as a TIPS service provider.
European Central Bank 2025-04-25
European Central Bank President Lagarde reiterates data-dependent policy after April 25 bp rate cut and urges stronger safeguards for non-banks and crypto-assets
European Central Bank President Christine Lagarde, at the IMF Spring Meetings, highlighted trade tensions' impact on investment and inflation, confirming a 25 basis point ECB interest rate cut. She reported euro area GDP growth of 0.9% in 2024, with moderate growth in early 2025 amid financial market tensions. Lagarde emphasized the need for macroprudential measures, Basel framework implementation, and strengthening non-bank resilience, while noting limited current crypto-asset risks and advocating for a digital euro legislative framework.