ECB’s Lagarde: ‘We Will Know More’ on Tariff Front by June Meeting

17 April 2025

By Marta Vilar – MADRID (Econostream) - European Central Bank President Christine Lagarde said on Thursday that the ECB would know more about the impact of US tariffs on the euro area by its next Governing Council meeting in June.

During the press conference following the Council’s meeting, in which the ECB decided to cut its three key interest rates by 25bp, Lagarde said that ‘there is so much ongoing’ with respect to trade tensions, ‘some of which will probably settle a bit by our June meeting’.

‘We will know more on that front’, she said.

The situation with respect to fiscal spending in Europe would also be clearer by June, she said.

‘As I said earlier, there is no better time to be data-dependent’, she added.

The ECB was aware that tariffs would have a negative impact on demand and growth, she said, whereas the impact on inflation would become clearer as time went by.

There were different opinions within the Governing Council regarding the short- and long-term impact of tariffs on inflation, she said.

Regarding the removal of the reference about monetary policy being 'meaningfully less restrictive’, as stated in the March meeting statement, Lagarde said that wording had become ‘meaningless’ under the current circumstances.

‘Meaningless because assessing restrictiveness relies heavily on the comparison between the policy rates and the neutral rates’, she said.

The neutral rate was only useful for policy decisions in a world with no shocks, she said, which was not the case now.

‘That assessment of the restrictiveness is not operative anymore’, she said.

Given the expected high uncertainty in the coming months, the ECB should then determine its stance based on two aspects: ‘readiness’ and ‘agility’, according to Lagarde.

‘We must be attentive to all the developments and in particular the development of those new shocks, and be able to make the appropriate determination’, she said with regards to the former principle.

With respect to agility, Lagarde said that ‘given the speed at which we see developments, the impact they have, the spillovers that we can analyse, it's not going to be a question of rushing to a particular stance, but it will be a question of agility in the face of what we are seeing.’

The degree to which the ECB should keep easing its monetary policy would be determined by the institution’s ‘readiness’ and ‘agility’, according to Lagarde.

‘We did not discuss the matter of stimulation, and we certainly rallied around the statement … that we will take the appropriate monetary policy stance and decisions in order to make sure that we deliver on our commitment to reach target, 2%, medium term, sustainable’, she said.

The decision to cut rates by 25bp was unanimous and no Governing Council member argued in favour of a 50bp move, according to Lagarde.

‘There were some to say; “Well, it might warrant a 50 [bp cut], but at the end of the day, this is not what I'm arguing for”’, she said. ‘But there was not any single argument in favour of arriving at 50bp.’