ECB Insight: Lagarde Refreshes, Not Revises, the Message

30 October 2025

By David Barwick – FRANKFURT (Econostream) – It was just as well that the European Central Bank on Thursday also decided to move to the next phase of the digital euro project, which to some degree filled the vacuum left by a monetary policy decision notably short on actual news.

A happy coincidence was that in his previous role as ECB Executive Board member, Governor Fabio Panetta of Banca d’Italia – which hosted this external meeting of the Governing Council in Florence, Italy – was responsible precisely for the digital euro.

The combination of that and disappointing Italian GDP data earlier in the day allowed ECB President Christine Lagarde to let Panetta eat up a healthy portion of the time available at the press conference following the universally expected – and unanimously agreed – decision to leave rates unchanged.

Lagarde’s remarks contained a few nuggets for those interested in the evolution of euro area monetary policy, but the overall tone was studiedly neutral.

Even after the generally strong GDP data earlier in the day (Lagarde: “I would not complain too much about growth at this point in time”) and the recent PMIs, Lagarde declined — or rather eluded — the invitation to say that the next rate move could as easily be a cut as a hike, despite readily reaffirming that policy remained “in a good place.”

“I have said that we are in a good place; I continue to say that we are in a good place,” was her response to this question. “And I repeat that we will take the necessary measures and steps on the basis of data, meeting by meeting, to make sure that we stay in a good place.”

The inflation target was symmetrical and the ECB would stick to it, she said — and it was clear that for her, the issue of the next move was settled.

Lagarde also addressed the monetary policy statement’s revised risk language, which dropped September’s description of risks to growth as “more balanced” — a change that might seem to carry interpretive weight.

In reality, however, her explanation left little doubt that it did not. The ECB simply could not keep repeating the same formula “ad nauseum” once it had declared the range of risks narrower and more balanced, she said. The new wording, she made clear, was meant to refresh the language, not to revise the substance.

In effect, the Council still sees the outlook as largely unchanged, acknowledging only that some downside risks have faded. The underlying message remains one of continuity rather than recalibration.

Lagarde nonetheless pointed to the possibility that supply chain disruptions could pose an upside risk to inflation. The ECB was in a “wait-and-see mode” on that front, she said, adding that wages and services inflation were “elements we are also monitoring,” though she “wouldn’t call it a risk.”

She meanwhile dismissed widespread suspicions — among market participants and even some Council members — that any delay in implementing ETS 2 as assumed in the ECB’s projections would be meaningful.

Colleagues at the European Commission “are still strongly of the view that ETS 2, which is committed, must proceed, and the deadline for implementation is still 2027,” she said. A “slight smoothing in the implementation” was however under discussion and could mean that “the impact might be spread a little bit more over time,” she said.

The December projections would take this into account, she said, offering not the slightest hint that this would change the inflation outlook materially.

Overall, little has changed, except that an already highly unlikely December cut now looks even less probable. We therefore have no hesitation repeating what we wrote here two days ago: further easing is not our base case, and if another rate cut comes, March remains the earliest realistic window based on what is known today.

Put another way, 2% still looks like the terminal rate — always bearing in mind that any terminal rate defined in advance is, by definition, subject to change. For all the new phrasing, nothing of substance moved in Florence.