OR Christine Lagarde Yesterday (05.06.2025) he presented a prospect for the eurozone that may be as good as possible, as the president of the European Central Bank (ECB) He described an economy with steady inflation in target, durable – albeit sluggish – growth and a healthy banking system.
In other words, based on Christine Lagarde’s forecasts, all that the ECB may affect seems to work properly.
Within this favorable framework, officials in Frankfurt are moving more passive, after eight interest rate cuts. According to Bloomberg sources, no new intervention is expected at the July meeting.
“The ECB can move from the emergency status of patience,” notes Irene Lauro, Schroders’ economist in London. “There is no evidence that duties are affecting growth – so we expect a pause.”
However, this loose juncture is excellent and, in a sense, fragile. The world remains full of uncertainties – from wars in Ukraine and the Middle East, to Trump’s duties threats and years of budgetary problems of many states.
Market is divided – new reduction maybe in September
The market is not fully convinced that interest rate cuts are over. At present, forecasts show 60% for another reduction in September, when the ECB is presenting new macroeconomic estimates.
On Thursday, Lagarde said: “Inflation is about the medium -term target of 2%” and promised constant ratings on whether the ECB policy remains appropriate.
Rumors of retirement and “historical respite”
This situation could have been the perfect time to leave, in the midst of rumors that he is considering leading the World Economic Forum. Although she did not deny it directly, she said she was determined to complete her term.
From the world crisis of 2007, the debt crisis, the pandemic and the historical explosion of inflation, moments of calm like this are rare. However, even in the “unfavorable scenario” of the ECB, with a complete resurgence of the US-EU trade war, the economy is projected to continue to grow without much change in inflation.
Call for structural reforms
Speaking on France 2 television, Lagarde called on governments to take advantage of this period of stability: “What matters to all governments is the first to price stability – and we have this today. And secondly, to act quickly: to reform, to simplify, to encourage innovation and investment. We have an incredible window of opportunity. “
The “ideal moment” does not mean the absence of risks. The threat of Trump’s duties, the war in Ukraine, the government in the Netherlands, the fiscal deficit of France, and the fact that 50% of EU citizens live in countries that violate the rules of the Stability Pact, confirm the fragile nature of stability.
Lagarde acknowledged that “current interest rate levels allow us to manage the uncertainties that come”, adding: “Triumphant rounds are nice, but there is always a next battle.”
For the time being, after five difficult summers for the ECB – from pandemic to interest rate increases and reductions – Lagarde can focus on reviewing the bank’s strategy, a more academic process that fits in the quiet summer of 2025.
As Mitch Resnik of Federated Hermes notes: “Without a” victory “over inflation, its declining course allows the ECB a more neutral stance in the coming months.”