ECB’s Lagarde: Higher Trade Tensions Would Make Inflation Outlook More Uncertain

10 February 2025

ECB’s Lagarde: Higher Trade Tensions Would Make Inflation Outlook More Uncertain
Christine Lagarde, president of the European Central Bank, at the ECB Governing Council press conference on December 12, 2024. Photo by Angela Morant/ECB under CC BY-NC-ND 2.0.

By Marta Vilar – MADRID (Econostream) – European Central Bank President Christine Lagarde said on Monday that the inflation outlook could face yet more uncertainty if global trade tensions worsened.

In a speech at the European Union Parliament in Strasbourg, France, Lagarde said, ‘Inflation is set to return to our 2% medium-term target in the course of this year, with risks on both the upside and the downside.’

‘Greater friction in global trade would make the euro area inflation outlook more uncertain’, she added.

The January CPI reading, at 2.5%, was seen as developing ‘broadly in line’ with the ECB’s forecasts, she said.

‘Wage growth is moderating as expected, although it remains elevated, while profits are partially buffering the impact of wage increases on inflation’, she said.

A recovery in economic growth was still expected, according to Lagarde, given the ‘solid’ employment conditions, easier monetary policy and an expected positive effect from exports and higher global demand.

‘In particular, the disinflation process in the euro area is well on track’, she said. ‘Most measures of underlying inflation suggest that inflation will settle at around our target on a sustained basis.’

Despite still restrictive financial conditions, the ECB’s interest rate cuts were lowering the cost of borrowing, she said.

 

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