ECB President Lagarde stated that although international trade tensions still pose a threat, inflation risks have become less extreme.
Lagarde said on Friday, "The outlook for inflation in the eurozone remains uncertain, with the global trade policy environment remaining volatile, presenting both upside and downside risks."
According to the statement by the International Monetary and Financial Committee, "Meanwhile, as new information emerges, the scope of risks in both directions has narrowed."
ECB officials believe that the current monetary policy is well prepared to respond to any future developments in the global economy. Despite trade tensions, inflation is close to target levels and eurozone output continues to grow, so they are not inclined to cut interest rates further beyond the eight cuts already implemented. Investors and economists generally agree with this view.
Lagarde also stated:
"Despite the ongoing headwinds from trade policies, global economic activity remains moderate but stable."
In the eurozone, "the probability of significant downside risks related to tariffs has decreased with the conclusion of new trade agreements, and the risks to growth have become more balanced."
"While preliminary trade agreements have reduced uncertainty, uncertainty remains high and could weigh on investment. The full impact of the evolving policy environment will only become clear over time, but early signs of a reconfiguration in global trade flows are emerging."
"We will adopt a data-driven, meeting-by-meeting approach to determine the appropriate monetary policy stance, without pre-committing to a specific interest rate path."
