In a speech to the European Parliament on its draft resolution on the ECB Annual Report, European Central Bank President Christine Lagarde outlined the euro area outlook and restated the ECB’s current policy stance, pointing to inflation moving broadly in line with projections and expected to return to the 2% medium-term target in the course of this year. She noted that the ECB has lowered interest rates by 125 basis points since June, taking the deposit facility rate to 2.75%, and reiterated that decisions will remain data-dependent and taken meeting by meeting, without pre-committing to a rate path. Lagarde described 2024 growth as modest, with output stagnating in the fourth quarter but 0.9% higher than at end-2023, alongside a split between contracting manufacturing and expanding services and fragile consumer confidence. Inflation stood at 2.5% in January and core inflation at 2.7%, with wage growth moderating but still elevated and profits partially buffering the impact of wage increases; greater friction in global trade was flagged as a source of uncertainty for the inflation outlook. Beyond the near-term stance, she highlighted recurring supply shocks, underinvestment and Europe’s productivity gap, calling for deeper EU internal market integration, greater payments autonomy and preparation for a digital euro to support resilience and private innovation, alongside more private investment supported by a genuine capital markets union and higher investment in infrastructure, research and green technologies. She also pointed to the ECB’s ongoing assessment of its monetary policy strategy, including work on implications of a more volatile environment, the evolving policy toolkit and reaction function, and approaches to risk and uncertainty in policy setting and communications, including the analytical needs and economic models used for policy.
European Central Bank 2025-02-10
European Central Bank reiterates data-dependent policy after cutting rates to 2.75% and stresses digital euro in European Parliament
ECB President Christine Lagarde addressed the European Parliament, reaffirming the ECB's policy stance with inflation expected to align with projections and return to the 2% target this year. She noted a 125 basis point rate cut since June, bringing the deposit facility rate to 2.75%, and emphasized data-dependent decision-making. Lagarde highlighted modest 2024 growth, ongoing supply shocks, and the need for EU market integration, payments autonomy, and a digital euro to bolster resilience and innovation.