ECB Insight: Doves Find Their Voices, But Where Were They Thursday?

12 September 2025

By David Barwick – FRANKFURT (Econostream) – Prominent doves on the European Central Bank’s Governing Council were at pains on Friday to breathe new life into the now somewhat moribund idea that the ECB might cut interest rates again soon.

Fair enough – that’s what they and their colleagues do, after all. But where were they on Thursday?

As we wrote of the press conference following the Council’s decision to leave rates unchanged and assess as “more balanced” the risks to growth, “any pushback [by the doves] failed to leave a visible mark on [President Christine] Lagarde’s messaging.”

For Banque de France Governor François Villeroy de Galhau, the culprit was quickly singled out: the markets.

“There is no predetermined path, but another rate cut is entirely possible at the coming meetings,” he said today in an interview with French broadcaster BFM Business. “From this point of view, I believe that perhaps the markets’ interpretation yesterday showed a certain exaggeration in the restrictive reading, in my opinion.”

Of course, there was no way he was going to lay the blame at the feet of his compatriot Lagarde, whom he has spent the last six years name-checking in every speech and interview as if the two French nationals bore the brunt of the weight of determining euro area monetary policy.

Villeroy’s effort to keep a cut on the table or at least the menu was reinforced, unsurprisingly, by Bank of Finland Governor Olli Rehn, who told a press conference of his own that the risk of undershooting “in the longer term should not be underestimated” and warned against “excessive optimism.”

Similarly, Bank of Lithuania Governor Gediminas Šimkus, who 10 days ago saw a good chance that Santa Claus would come “with scissors,” in a domestic radio interview today still wanted “all doors” left open and sounded very much like he thought downside risks to inflation dominated – just like 10 days ago.

Had the doves succeeded, Thursday’s meeting would have been the non-event many observers expected. Once the balance-of-risks assessment turned more positive, that was off the table. Their failure to insert even a hint of easing suggests they simply caved.

Lagarde certainly doesn’t deserve any blame. True, her account of yesterday’s “unanimity” was fuzzy enough for one to reasonably doubt that Council opinion was monolithic right down to the details.

But after the hawkishness of Lagarde’s July 24 performance already appeared to exceed somewhat the tone of the meeting that directly preceded it, it was clear that yesterday was a key chance for the doves to steer things in a way conducive to further easing in 2025.

They – not the markets – blew it, squandering what may have been the last appropriate opportunity to shape expectations.

Other dovish policymakers will also find their voice sooner or later. The risk is that this will muddy the waters more than anything else. The clarity of yesterday afternoon will be called into question and potentially seen – wrongly – as misleading.

It would take more than what we heard today for us to revisit our view that the ECB has set the stage for interest rates to persist at 2% into 2026. As of now, it would require a clear shift in the outlook for this to change – not the belated grumbling of the doves.