ECB’s Lagarde: Euro Area Resilient Despite Global Uncertainty

23 June 2025

ECB’s Lagarde: Euro Area Resilient Despite Global Uncertainty
Christine Lagarde, president of the European Central Bank, at the ECB press conference in Frankfurt on June 5, 2025. Photo by the ECB under CC BY-NC-ND 2.0.

By David Barwick – FRANKFURT (Econostream) – European Central Bank President Christine Lagarde said Monday that the euro area economy remained resilient despite rising global uncertainty, with inflation broadly aligned with the ECB’s 2% target..

“At the current interest rate levels, we believe that we are in a good position to navigate the uncertain circumstances”, she said at a hearing of the Committee on Economic and Monetary Affairs of the European Parliament in Brussels.

“Especially in the current conditions of exceptional uncertainty, we will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy”, she said.

Lagarde reiterated that the Governing Council’s June decision to lower interest rates by 25bp had been driven by increased confidence in the inflation outlook, with both headline and core measures declining in May.

“Most indicators of underlying inflation continue to suggest that inflation will stabilise sustainably at our 2% medium-term target,” she said.

Nominal wage growth had moderated to 3.8% in the first quarter, she noted, down from 4.1% previously, and was expected to continue declining as pressures to recover earlier real wage losses faded.

The ECB’s latest staff projections foresee headline inflation averaging 2.0% this year, dipping to 1.6% in 2026 and returning to 2.0% in 2027. Lagarde said the temporary undershooting of target in 2026 was partly due to a stronger euro and lower energy prices.

While survey indicators point to some near-term economic softness, the labour market remained robust and real incomes were rising, she said. These and other factors “should help consumers and firms withstand the fallout from a volatile global environment,” she added.

However, risks to growth remain tilted to the downside, Lagarde warned, citing the potential for worsening trade tensions, geopolitical instability and weaker market sentiment.

Still, “a swift resolution to trade and geopolitical tensions or a further increase in defence and infrastructure spending could spur activity by more than expected”, she said.

Lagarde used the occasion to urge further structural reform and investment across the euro area, saying now was the time to enhance productivity and competitiveness.

“By making the right policy choices, we can leverage the current momentum to boost the economic perspectives for Europe and its citizens,” she said.