ECB Insight: Lagarde Refines “Good Place” Message Into All-But-Explicit On-Hold Stance

1 October 2025

By David Barwick – FRANKFURT (Econostream) – European Central Bank President Christine Lagarde’s speech in Helsinki on Tuesday confirmed the steady honing of her message over recent weeks: policy is firmly on hold, inflation risks are bounded, and the shocks of trade conflict are proving less destabilizing than once feared.

Lagarde has described the ECB as being in a “good place” ever since the press conference of June 5, and it was always clear that it was shorthand for the central bank’s conviction that inflation is essentially at target, growth resilient enough and policy rates appropriately set.

Initially, that meant in effect that rates could conceivably be at their terminal level, even if this took a generous dose of faith in the future. By now, the tentativeness of that proposition has given way to a degree of confidence such that, were it not for the ban on forward guidance, the ECB would likely have dispensed with the pretence already and been explicit.

Her Helsinki remarks in any case gave this notion more precise shape. “Trade shocks are not creating new inflationary pressures,” she said, adding that the risks to inflation “appear quite contained in both directions.”

For the ECB, long preoccupied with downside surprises in an environment of extreme uncertainty, this marked a further narrowing of the range of possible outcomes and confirmed similar remarks by Lagarde in an interview 10 days previously as well as at the press conference on September 11.

On the latter occasion, even as she declared retaliation and trade uncertainty to be downside risks that had “clearly moved out of our radar screen,” she still underlined the unusually high uncertainty of the outlook and recited multiple potential channels through which inflation could diverge.

In Helsinki, the fact that she frankly acknowledged uncertainty about how euro area companies would adapt to the new setting and about unpredictable geopolitical developments does not obscure the fact that her assessment tilted more clearly than on any other occasion in recent memory towards greater confidence.

Scenario analysis, she said, showed only minimal deviations from the baseline even under plausible stress.

October was never likely to see policy action, but Lagarde’s message is not about four weeks from now. It is about the forest, not the trees: 2% looks increasingly like the terminal rate, to be held as long as nothing compels change, with such change in the foreseeable future deemed increasingly improbable by the ECB.

That framing also hints at something few would have dared to treat as more than purely hypothetical not long ago: that the next move could, in the right circumstances, be upward.

Nothing in Tuesday’s remarks implied that tightening is in sight, but by presenting 2% as a rate at which the ECB can wait comfortably and react either way, Lagarde implicitly acknowledged that policy is not on a one-way easing track.

Seen alongside her September 20 interview with Danish broadcaster DRTV, in which she declared inflation to have reached target and uncertainty to have halved, Lagarde’s Helsinki speech strengthens the impression of a Governing Council that only weeks ago still saw the possibility of another cut, but now increasingly views the easing cycle as over.

The overriding message was not that policy might soon change, but rather the opposite: that, with inflation stable around 2% and both upside and downside risks circumscribed, the ECB can afford to do nothing. That in itself is a striking shift from earlier in the year, when uncertainty dominated the conversation and left markets speculating about where rates might still have to go.