Lagarde says inflation risks ‘quite contained’ in each direction

[HELSINKI] The European Central Bank President Christine Lagarde said there are no serious threats to the outlook for euro-area inflation but that officials must remain vigilant.

“The risks to inflation appear quite contained in both directions,” Lagarde said on Tuesday (Sep 30) in a speech. “With policy rates now at 2 per cent, we are well placed to respond if the risks to inflation shift, or if new shocks emerge that threaten our target.”

The comments reinforce the idea that the ECB is in no rush to lower borrowing costs further, having slashed the deposit rate in half in the space of a year and overseen an economy that’s maintained growth in the face of Donald Trump’s trade storm. 

“We are in a good place today, but that place is not fixed,” Lagarde told a monetary-policy conference in Helsinki. “Our task is to sustain it with agility, humility and a firm grounding in the data.”

For now, higher tariffs aren’t having much effect on prices in the 20-nation eurozone, she said, though cited a resurgence of such tensions among “limited” downside risks, alongside upside dangers stemming from a jump in government spending in Europe.

“All in all, with no retaliation and an appreciating exchange rate, tariffs have had little inflationary impact so far, with their adverse effects mainly limited to growth,” Lagarde said, adding that Europe’s deal with the US reduced uncertainty “faster than we expected.”

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Lagarde says ECB has hit inflation goal but uncertainty remains

Inflation in the currency bloc is likely to have quickened this month – reaching 2.2 per cent, having matched the ECB’s 2 per cent target the previous month, according to a Bloomberg survey. The data are due Wednesday. 

The broader picture, though, is for small undershoots of 1.7 per cent in 2026 and 1.9 per cent in 2027 – an outlook that most policymakers are currently downplaying. An ECB survey on Friday showed that consumer’s price expectations for the next 12 months rose in August.

Using similar language to Lagarde, chief economist Philip Lane said Monday that he doesn’t see any major risks to inflation in either direction. BLOOMBERG