ECB’s Lagarde: Will Not Anticipate Next Decision, But More Clarity to Come in Next Few Months

12 December 2024

By Marta Vilar – FRANKFURT (Econostream) – European Central Bank President Christine Lagarde on Thursday said that the ECB was not going to anticipate what its next move would be, but observed that some uncertainty would fade in a few months’ time.

During the press conference following the Governing Council meeting at which the ECB decided to cut the Deposit Facility Rate by 25bp, Lagarde reiterated that the ECB would stick to a data-dependent approach.

‘We will continue to be data-dependent, we will continue to decide meeting by meeting, we will continue to not have a precomitted path, downward’, she said.

The ECB would therefore not anticipate what the next decision would be, according to Lagarde.

‘[W]e are not anticipating x or y for the next monetary policy decision that we will take’, she said. ‘A lot is going to be clarified, we hope, in the next few months, not in the next few weeks.’

Uncertainty had been intensively discussed by the Governing Council during the meeting, she added.

‘To assume anything in particular at any point in time I think is not the right approach because we are going to continue to be data dependent, we are not precomitting to a particular path’, she said.

The decision to cut by 25bp was unanimous despite there also having been some discussion about a 50bp move, she indicated.

Asked whether undershooting inflation risks were now higher than the risks of overshooting, Lagarde said that they were more balanced.

‘Risks to inflation are clearly stated in our monetary policy statement. They are more two-sided than they were before’, she said.

The victory against inflation was not yet achieved but disinflation towards 2% was ‘really on track’, she indicated.

The topic of the neutral rate did not surface during the Council’s discussions, Lagarde announced.

‘I think the conventional wisdom around the table is that it [the neutral rate] is probably a little higher than where it was before for multiple reasons, and that we will debate in due course’, she said. ‘But it’s premature to do that at the moment.’

The removal of the reference to rates being 'sufficiently restrictive for as long as necessary' was ‘completely legitimate and natural’, she said, and was justified by being ‘much closer’ to the 2% inflation target.

‘If you want to compare apples and apples: ... restrictiveness goes, appropriate determination replaces it’, she said. ‘Because we are getting closer, but we are not done. Let’s face it.’

The ECB should remain ‘very cautious’ as domestic inflation and wages were still high, despite the recent slowdown, she said.

Asked about France and the potential use of the Transmission Protection Instrument, Lagarde answered that the Governing Council had not discussed anything related to this instrument.

The impact of Trump’s potential tariffs on inflation was uncertain, she said.

‘The trade dimension is only incorporated indirectly, as you said, using the yield curve and other market-determined elements’, she said.