ECB Insight: Lagarde Confirms That the End Is Nigh

5 June 2025

By David Barwick – FRANKFURT (Econostream) – There was only one attempt during Thursday’s press conference to get European Central Bank President Christine Lagarde to confirm explicitly that euro area monetary policy had reached neutral territory. She demurred, but it didn’t matter, as she managed all the same to convey the idea that the ECB was done or close to it.

Indeed, she did so multiple times, with ever-increasing clarity.

The first indication that the ECB had reached a point not quite like every other one came at the very outset of the Q&A. ‘With today’s cut, at the current level of interest rates, we believe that we are in a good position to navigate the uncertain conditions that will be coming up’, she said.

It is self-evident that the ECB will always take a decision that it feels leaves it in a ‘good position’, to the extent possible, from which to proceed. Anything else would be absurd, a dereliction of duty.

The fact however that Lagarde does not point out at every opportunity that the Governing Council has left itself properly situated suggests an attempt to distinguish between the ‘good position’ reached today and the ‘good position’ that is assumed after every rate decision, but rarely emphasised.

She returned to the theme a short while later. ‘I think we are well positioned … after that 25bp rate cut and with the rate path as it is’, she said. ‘We are in a good place.’

Lagarde was asked whether this meant that the ECB’s easing was done. Rather than simply noting that it was impossible to answer this question and that a clear answer would be at odds with the ECB’s current approach, she invoked yet again the sentiment that ‘we are in a good position’.

In effect, it began to sound like a mantra, underscoring the message that today’s 25bp cut marked a meaningful turning point.

‘Again, we are in a good position, and we are in a good position on the basis of the current rate path and with the 25bp rate cuts that we decided’, she said.

The ECB would decide based on incoming data ‘whether or not that position is secure in order to deliver on our 2% medium-term target’, she said. ‘What I’m saying today is we are in that good position.’

Asked then if this meant that the ECB had reached neutral territory, which it fairly clearly had, Lagarde denied that the Governing Council had discussed this ‘wonderful concept’ at all, before making abundantly clear that today’s cut stood apart.

‘[W]e have just nearly concluded a cycle of monetary policy that dealt with a series of shocks’, she said.

And lest anyone not get the message, she doubled down in answering the next question: ‘[W]ith today’s cut and the current level of interest rates … we are getting to the end of the monetary policy cycle’.

We had expected her to drop hints along this line today, which is why we wrote here on Tuesday that she would indicate that ‘the air is growing thinner for further cuts’. We expected her to indicate that neutral territory had been reached and that the job was mostly done.

If anything, she did so more hawkishly than we anticipated, though one must give her some leeway. It was always going to be a challenge to convey these messages without sounding more hawkish than would have been ideal, given the comfortable state of market expectations going into the meeting.

Of course, none of this means that the ECB is done easing. We had said on Tuesday that Lagarde would not slam any doors shut today, and she of course did not. But what we wrote in the same paragraph of that piece was fully borne out: ‘[B]ased on current information, July is significantly less likely than June to bring a cut, even unlikely.’