ECB Insight: Lagarde Predicts More Clarity Ahead, Without Trying to Encourage Expectations

17 April 2025

By David Barwick – FRANKFURT (Econostream) – Somewhat unusually, no one tried to draw out European Central Bank President Christine Lagarde at Thursday’s press conference on the Governing Council’s sentiment toward a potential cut at the next monetary policy meeting on June 5.

It was clear all the same that even after having pointed to mounting downside risks to growth, she would have kept her answer to such a question terse and non-committal, just as she refrained from deliberately encouraging expectations throughout her performance today.

On the one hand, this is a logical consequence of the fact that amid what the ECB has shifted to calling ‘exceptional’ rather than merely ‘rising’ uncertainty, monetary authorities are wedded ‘more than ever now’, in her words, to the data-dependent approach to policymaking.

This is (and was) incompatible with ceding room to manoeuvre by pre-indicating future decisions.

On the other hand, her scrupulousness in refusing to confirm the direction of travel – in no contradiction with her reiteration of the destination – is also likely to have been part of the understanding that allowed her to bring Council doubters like Austrian National Bank Governor Robert Holzmann on board and achieve unanimity.

The same of course goes for the banishment of any reference to restrictiveness from the monetary policy statement. To be sure, Lagarde packaged that as a logical reaction to the circumstance that any such assessment had become ‘meaningless’, given that the exercise ‘relies heavily on the comparison between the policy rates and the neutral rate.’

One can easily argue that this reasoning was valid previously, but in any case, the monetary policy slate has been arguably wiped cleaner today than in quite some time. While one can suspect – as we do – that June will bring another 25bp of easing, the ECB is comfortably positioned to let developments play out and then react if, as and when needed – with ‘agility’, a strong contender for the word of the day.

What shone through was the hope that the current cloud of uncertainty will have dissipated somewhat – ‘settle a bit’, as Lagarde said - by the Council’s June 5 meeting, and all the more so by the subsequent such occasion on July 14.

Lagarde however would probably not want today’s assertion that ‘we will know more on [the tariff] front’ when policymakers next convene to be understood in the same way as her similar assurance in March 2024 about knowing a little more in April but ‘a lot more’ in June was understood by everyone - rightfully so - to implicitly endorse a pending cut.

Rather, the ECB is now firmly in the world she introduced in her ECB Watchers conference speech a month ago, an intervention in which, like today, she also invoked the importance of agility for policy and in particular emphasised the incompatibility between staying agile and talking about the future.

We don’t understand this as an abstract academic principle, but rather as an acknowledgment of the fact that not every Council member assumes that what the ECB will learn by the time of the June meeting will oblige it to cut again.

We have said here before that it is hard to be agile without moving, by which we meant that calls for agility were nothing more than coded expressions of support for more rate cuts. But that was in the context of comments by Banque de France Governor François Villeroy de Galhau, for whom exhortations to be agile have indeed tended to be appeals for further easing.

It may however be worth noting that a sudden pause can also demonstrate agility.