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4h ago

Lagarde Says Euro Area Weathering U.S. Tariffs, Inflation Risks Contained

A July deal capping most tariffs at 15% reduced uncertainty following the EU’s decision to shelve retaliation.

FILE - President of the European Central Bank Christine Lagarde briefs the media during a press conference at the bank's headquarters in Frankfurt, Germany, Thursday, Sept. 11, 2025. (AP Photo/Michael Probst, File)
European Central Bank (ECB) President Christine Lagarde addresses the media after the ECB's Governing Council meeting, at the ECB headquarters in Frankfurt, Germany, July 24, 2025. REUTERS/Heiko Becker/File Photo
European Central Bank President Christine Lagarde warned that new shocks could lie ahead

Overview

  • The European Central Bank has kept its policy rate at 2% since June and signals no urgency to adjust further.
  • Christine Lagarde says recent trade shocks are not fueling new price pressures, removing the classic growth‑inflation trade‑off.
  • ECB analysis credits the absence of major supply‑chain bottlenecks, a stronger euro and nonretaliation by the EU for the milder impact.
  • Government investment is expected to add 0.25 percentage points to growth between 2025 and 2027, offsetting roughly one‑third of the trade shock.
  • Tariffs and uncertainty are still projected to trim about 0.7 percentage points from euro‑area growth through 2025–27, with investors seeing December as the earliest point for any fresh policy discussion.