ECB’s Lagarde: ‘Disinflationary Processes Is So Much on Track That We Are Nearing Completion’

22 April 2025

By David Barwick – FRANKFURT (Econostream) – European Central Bank President Christine Lagarde said Tuesday that the euro area was nearing completion of the disinflation process but was also in the midst of grappling with economic shocks.

In an interview with CNBC, Lagarde said that US trade policy ‘obviously has an impact, some of it positive, some of it negative’, she said. ‘I think on the growth front track, we've always said that it would be a lose-lose, and we are seeing it.’

Developments since tariffs were announced on April 2 had been ‘a bit counterintuitive’, she said. The ECB had initially expected the dollar to strengthen and the euro to weaken, she noted.

European monetary authorities naturally took into account the exchange rate in their policymaking, she said, declining to respond more directly to the question of whether, were the euro to continue to firm, the ECB would intervene.

Lagarde confirmed that the ECB was confident about returning to price stability.

‘The latest [inflation] reading was 2.2% and I think that we're heading towards our target … in the course of 2025, so that that disinflationary processes is so much on track that we are nearing completion’, she said. ‘But we have the shocks.’

These meant lower growth via dampened demand, she said. ‘The net impact on inflation will depend on what countermeasures are eventually taken by Europe. Then we have to take into account the fiscal push by the defence investment, by the infrastructure fund … and the impact of the structural reforms.’

That the trade tensions constituted a downside risk to growth was ‘pretty much a given, and not just in Europe’, she said.

The net impact of inflation was ‘to be seen’, she said. Lagarde repeated this when asked why the ECB wasn’t easing policy faster, pleading ‘too much variables coming into play’.

‘We have the options on the table, we will be … data-dependent, and in terms of options, we may well cut, we may well pause. It’s really going to be meeting-by-meeting, data-dependency’, she said.

The ECB would stick to this approach and be ‘as predictable as is possible with the data that are coming in’, she said.

‘Either we cut, either we pause, but we will be data-dependent to the extreme’, she said.

Inflation expectations were ‘very anchored around the 2%, including … in the medium term’, she said.

Lagarde said she hoped that any attempted dismissal of US Federal Reserve Chairman Jerome Powell by US President Donald Trump would not pose a risk to financial markets.

As to the possibility of a redirection of Chinese goods to European markets, said Lagarde, ‘China will face a moment where it has overcapacity, and it has to ask itself, what do I do with that overcapacity? Where do I sell my goods?’

‘Hopefully … there will be a trade deal between these two economic giants’, she said.

For the moment, she said, there would inevitably be negotiations between all parties about US tariffs.