European Central Bank President Lagarde: Interest rates are at a reasonable level

On Friday, European Central Bank President Christine Lagarde stated, interest rates are at a reasonable level, and based on current borrowing costs, the ECB’s policy is in the right place:

The interest rate levels we set in recent meetings, in my view, are appropriate. I have always said, given the inflation cycle we have already brought under control, our position is very good.

When discussing risks to the inflation outlook, Lagarde pointed out that the range of risks has narrowed, but if the US raises tariffs or there are supply chain disruptions, prices could still face upward pressures again.

Lagarde’s remarks highlight the ECB’s satisfaction with recent developments: consumer price growth is hovering near the 2% target, while the eurozone economy has displayed stronger-than-expected resilience against the backdrop of US tariffs. Most ECB officials have indicated they do not expect any need to adjust interest rates at the December meeting.

However, if the latest quarterly forecasts show inflation below target, it could still spark discussion. Minutes from the ECB’s October meeting showed that some officials were concerned about this scenario, but overall believe the current policy setting is sufficient to respond to shocks.

ECB Vice President Luis de Guindos said this week that he sees the risk of price growth being too weak as “limited,” and described the current 2% interest rate level as “appropriate.” ECB Chief Economist Philip Lane emphasized that the slowdown in wage growth should help curb the still too-rapid rise in non-energy costs.

When talking about the economy, Lagarde said that despite global transition, the eurozone’s expansion is proving more resilient than expected. “The situation is better than we envisaged. We expect a growth rate of 0.9% in early 2025, rising to 1.2% by September, and I would not be surprised if the pace is even higher by the end of the year.”

Regarding Germany’s recent difficulties and political tensions in France due to budget issues, Lagarde expressed optimism. “I am without a doubt optimistic—that’s my nature. In a world in transition, you need to act quickly, stay sharp, but also remain optimistic. So I always see the glass as half full, not half empty.”

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