By David Barwick – FRANKFURT (Econostream) – European Central Bank President Christine Lagarde on Tuesday said that euro area monetary policy had achieved its purpose and that the inflation picture seemed positive both at present and in the medium term.

Speaking to CNBC, Lagarde said, “I think we are generally in a good place. So, inflation is in a good place, because we are at around 2%.”

“I would say that the whole economy is in a good place,” she said, pointing to the ECB’s upward revisions to growth and to the strength of the labor market. “I would say that our monetary policy has done the job.”

With interest rates now at 2%, monetary policy was “positioned to respond, just in case,” she said. “Because while we are at that good place, things can happen. There can be shocks, there can be good developments, less good developments. And I think we are well positioned to respond to those potential shocks.”

“The latest [inflation] reading is good, the medium-term inflation is looking good as well,” she said.

Lagarde declined on principle to confirm that the ECB was done cutting rates, responding that she would “never say that.” Although the ECB had “tamed inflation so far,” policymakers had to “anticipate anything happening,” she said.

Uncertainty still remained and eluded models’ predictive power, she said in this context.

Asked how high the bar was for further cuts, Lagarde demurred again. “I cannot say,” she said. The Governing Council’s approach was meeting-by-meeting and data-dependent, she said.

Data-dependency included models and empirical data as well as “some judgement … to capture some of the elements that are not easily captured by models,” she said.

There were “both upside and downside risks to inflation,” she said. “I would say it’s fairly balanced at the moment.”

Growth risks at the moment were also “more balanced than it was,” she said, observing that various earlier concerns had somewhat abated. In this regard, she cited the absence of European retaliation to tariffs, the reduction of overall uncertainty and the failure of the euro to depreciate.

Just the same, there were downside risks to growth, she said, pointing to the potential for supply side and trade disruptions. “But the risks are much more balanced than they were,” she added.

“I have been quite surprised at how resilient our economies have been, and that has been the case in Europe,” she said. “So, we feared the worst and had the bad, but it wasn’t as bad as we had anticipated. In terms of growth, inflation, employment, I think that the economies have been very resilient, and much more so than we had anticipated.”

US tariffs affected European economic developments, but manageably so, she indicated, given that “it’s not a massive amount of trade that we do with the US.”

Still, the tariffs were “a serious add-on that has to be borne by someone,” she said. Early signs pointed to exporters, importers and consumers each bearing a third of the additional burden, she reported.

Lagarde expressed concern that “if there is too much restriction in that line of trade – between China and the US – a lot of the goods that would naturally go to the US will be diverted somewhere else: diverted to Central and Eastern Asia, but diverted to Europe as well. And that would have consequences for inflation.”

Trade between China and Europe in the wake of US tariffs had “increased, yes, not to the extent that we had feared, again, but it has increased, and that’s what we had anticipated in our forecasts,” she said.