In a hearing before the European Parliament’s Committee on Economic and Monetary Affairs, European Central Bank President Christine Lagarde set out the ECB’s assessment of the euro area outlook and its current monetary policy stance, while focusing on the international role of the euro. With inflation around 2% and expected to remain close to that level, she characterised the disinflationary process as over and noted that the Governing Council decided at its most recent meeting to keep key interest rates unchanged, with future decisions to remain data-dependent and taken meeting by meeting without pre-committing to a rate path. ECB staff projections foresee euro area growth of 1.2% in 2025, 1.0% in 2026 and 1.3% in 2027, with risks to growth described as more balanced as tariff-related downside risks have receded following a new trade deal, although renewed trade tensions and geopolitical uncertainty remain. Eurostat’s flash estimate put headline inflation at 2.2% in September (core inflation at 2.3%), while staff projections see headline inflation averaging 2.1% in 2025, 1.7% in 2026 and 1.9% in 2027, and inflation excluding energy and food falling from 2.4% in 2025 to 1.9% in 2026 and 1.8% in 2027. On the euro’s global role, she pointed to the ECB’s report indicating the euro accounts for about a fifth of international currency use (behind the US dollar at around 55%) and argued that a stronger international role would require policy progress including completing the Single Market, deepening capital markets through a savings and investments union with an ambitious timetable, safeguarding the rule of law and central bank independence, and sustaining open trade and security investment; the ECB’s contribution was framed around supporting financial and payments infrastructure, including swap and repo lines, work on distributed ledger technology settlement in central bank money, the digital euro, and initiatives to enhance cross-border payments in euro. Lagarde looked to forthcoming European Commission initiatives, including a Single Market roadmap and a proposal to strengthen capital market supervision, as relevant next steps for the reforms she highlighted.
European Central Bank 2025-10-06
European Central Bank signals data-dependent rate policy after holding rates unchanged and calls for reforms to strengthen the euro’s global role
European Central Bank President Christine Lagarde addressed the European Parliament, outlining the ECB's monetary policy stance and euro area outlook, with inflation expected to remain around 2%. The ECB kept key interest rates unchanged, with future decisions data-dependent. Lagarde emphasized the euro's international role, advocating for policy progress to strengthen its position, including completing the Single Market and enhancing capital markets.