ECB Insight: Lagarde Keeps the ECB Neutral as Risks Widen

5 February 2026

By David Barwick – FRANKFURT (Econostream) – With the rate decision a foregone conclusion, Thursday’s European Central Bank press conference was mostly a test of whether President Christine Lagarde would let a turbulent couple of weeks pull the ECB’s messaging off its well-worn neutral track. She did not.

If anything, the day’s most telling feature was how little appetite there seemed to be for feeding the news cycle. The press conference was unusually brisk and wrapped up several minutes earlier than normal despite multiple journalist hands still up—consistent with an ECB that is trying to keep “tone” from becoming an instrument.

Formally, the ECB delivered continuity. The Governing Council again kept rates unchanged, reiterated that inflation should stabilize at 2% in the medium term, and repeated the familiar triad of data-dependence, meeting-by-meeting decision-making and “no pre-commitment” to a rate path.

The statement naturally stressed uncertainty, emphasizing a “challenging global environment,” with the outlook “still uncertain” due to trade policy uncertainty and geopolitical tensions, which reinforces a widening distribution of outcomes even if the baseline remains intact.

That widening came through most clearly in the risk section, which laid out more explicit two-sided inflation channels tied to global volatility: tariffs and weaker demand on the downside, but energy, fragmented supply chains, and fiscal spending as potential upside forces.

Crucially, Lagarde nevertheless held the line that the overall risk assessment is not yet tipping. She described the situation as “broadly balanced,” even while conceding that individual risks had intensified.

The “good place” mantra survived as well, but barely. Only once and only when asked did she say, “I would certainly argue that we are in a good place and inflation is in a good place,” framing the phrase explicitly as conditional on medium-term convergence rather than any single data point.

On the euro, the press conference closely tracked the line we had flagged: treat the exchange rate as a conditional input through inflation and growth projections, not as a stand-alone trigger.

Lagarde stressed unsurprisingly that the ECB does “not target an exchange rate,” while arguing that the dollar’s decline has been a longer-running development and, importantly, that the effect of last year’s appreciation is already embedded in the baseline.

All in all, the ECB did what we said on Tuesday it would do: preserve “optionality without a tilt” and refuse to re-price its tone in response to each new headline.

The result was a tame, disciplined press conference that reaffirmed the ECB’s current communications strategy: keep the baseline steady, acknowledge that uncertainty is high, and avoid giving markets any rhetorical excuse to front-run a policy move that the Council itself is clearly still far from organizing around.