PRESS CONFERENCE

Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB

Frankfurt am Main, 17 April 2025

Good afternoon, the Vice-President and I welcome you to our press conference.

The Governing Council today decided to lower the three key ECB interest rates by 25 basis points. In particular, the decision to lower the deposit facility rate – the rate through which we steer the monetary policy stance – is based on our updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission.

The disinflation process is well on track. Inflation has continued to develop as staff expected, with both headline and core inflation declining in March. Services inflation has also eased markedly over recent months. Most measures of underlying inflation suggest that inflation will settle at around our two per cent medium-term target on a sustained basis. Wage growth is moderating, and profits are partially buffering the impact of still elevated wage growth on inflation. The euro area economy has been building up some resilience against global shocks, but the outlook for growth has deteriorated owing to rising trade tensions. Increased uncertainty is likely to reduce confidence among households and firms, and the adverse and volatile market response to the trade tensions is likely to have a tightening impact on financing conditions. These factors may further weigh on the economic outlook for the euro area.

We are determined to ensure that inflation stabilises sustainably at our two per cent medium-term target. Especially in current conditions of exceptional uncertainty, we will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance. In particular, our interest rate decisions will be based on our assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission. We are not pre-committing to a particular rate path.

The decisions taken today are set out in a press release available on our website.

I will now outline in more detail how we see the economy and inflation developing and will then explain our assessment of financial and monetary conditions.

Economic activity

The economic outlook is clouded by exceptional uncertainty. Euro area exporters face new barriers to trade, although their scope remains unclear. Disruptions to international commerce, financial market tensions and geopolitical uncertainty are weighing on business investment. As consumers become more cautious about the future, they may hold back from spending as well.

At the same time, the euro area economy has been building up some resilience against the global shocks. The economy is likely to have grown in the first quarter of the year, and manufacturing has shown signs of stabilisation. Unemployment fell to 6.1 per cent in February, its lowest level since the launch of the euro. A strong labour market, higher real incomes and the impact of our monetary policy should underpin spending. The important policy initiatives that have been launched at the national and EU levels to increase defence spending and infrastructure investment can be expected to bolster manufacturing, which is also reflected in recent surveys.

In the present geopolitical environment, it is even more urgent for fiscal and structural policies to make the euro area economy more productive, competitive and resilient. The European Commission’s Competitiveness Compass provides a concrete roadmap for action, and its proposals, including on simplification, should be swiftly adopted. This includes completing the savings and investment union, following a clear and ambitious timetable, which should help savers benefit from more opportunities to invest and improve firms’ access to finance, especially risk capital. It is also important to rapidly establish the legislative framework to prepare the ground for the potential introduction of a digital euro. Governments should ensure sustainable public finances in line with the EU’s economic governance framework and prioritise essential growth-enhancing structural reforms and strategic investment.

Inflation

Annual inflation edged down to 2.2 per cent in March. Energy prices fell by 1.0 per cent, after a slight rise in February, while food price inflation rose to 2.9 per cent in March, from 2.7 per cent in February. Goods inflation was stable at 0.6 per cent. Services inflation fell again in March, to 3.5 per cent, and it now stands half a percentage point below the rate recorded at the end of last year.

Most indicators of underlying inflation are pointing to a sustained return of inflation to our two per cent medium-term target. Domestic inflation has declined since the end of 2024. Wages are gradually moderating. In the last quarter of 2024 annual growth in compensation per employee stood at 4.1 per cent, down from 4.5 per cent in the previous quarter. Rising productivity also meant that unit labour costs grew more slowly. The ECB’s wage tracker and information from our contacts with companies point to a decline in wage growth in 2025, as also indicated in the March staff projections. Unit profits fell at an annual rate of 1.1 per cent at the end of last year, contributing to lower domestic inflation.

Most measures of longer-term inflation expectations continue to stand at around 2 per cent, which supports the sustainable return of inflation to our target.

Risk assessment

Downside risks to economic growth have increased. The major escalation in global trade tensions and associated uncertainties will likely lower euro area growth by dampening exports, and it may drag down investment and consumption. Deteriorating financial market sentiment could lead to tighter financing conditions, increase risk aversion and make firms and households less willing to invest and consume. Geopolitical tensions, such as Russia’s unjustified war against Ukraine and the tragic conflict in the Middle East, also remain a major source of uncertainty. At the same time, an increase in defence and infrastructure spending would add to growth.

Increasing global trade disruptions are adding more uncertainty to the outlook for euro area inflation. Falling global energy prices and appreciation of the euro could put further downward pressure on inflation. This could be reinforced by lower demand for euro area exports owing to higher tariffs, and a re-routing of exports into the euro area from countries with overcapacity. Adverse financial market reactions to the trade tensions could weigh on domestic demand and thereby also lower inflation. By contrast, a fragmentation of global supply chains could raise inflation by pushing up import prices. A boost in defence and infrastructure spending could also raise inflation over the medium term. Extreme weather events, and the unfolding climate crisis more broadly, could drive up food prices by more than expected.

Financial and monetary conditions

Risk-free interest rates have declined in response to the escalating trade tensions. Equity prices have fallen amid high volatility and corporate bond spreads have widened around the globe. The euro has strengthened over recent weeks as investor sentiment has proven more resilient towards the euro area than towards other economies.

The latest official statistics on corporate borrowing, which predated these market tensions, continued to indicate that our interest rate cuts had made it less expensive for firms to borrow. The average interest rate on new loans to firms declined to 4.1 per cent in February, from 4.3 per cent in January. Firms’ cost of issuing market-based debt declined to 3.5 per cent in February, but there has been some upward pressure more recently. Moreover, growth in lending to firms picked up again in February, to 2.2 per cent, while debt securities issuance by firms grew at an unchanged rate of 3.2 per cent.

At the same time, credit standards for business loans tightened slightly again in the first quarter of 2025, as reported in our latest bank lending survey for the euro area. As in the previous quarter, this was mainly because banks are becoming more concerned about the economic risks faced by their customers. Demand for loans to firms decreased slightly in the first quarter, after a modest recovery in previous quarters.

The average rate on new mortgages, at 3.3 per cent in February, increased on the back of earlier rises in longer-term market rates. Mortgage lending continued to strengthen in February, albeit at a still subdued annual rate of 1.5 per cent, as banks eased their credit standards and demand for loans to households continued to increase strongly.

Conclusion

The Governing Council today decided to lower the three key ECB interest rates by 25 basis points. In particular, the decision to lower the deposit facility rate – the rate through which we steer the monetary policy stance – is based on our updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission. We are determined to ensure that inflation stabilises sustainably at our two per cent medium-term target. Especially in current conditions of exceptional uncertainty, we will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance. In particular, our interest rate decisions will be based on our assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission. We are not pre-committing to a particular rate path.

In any case, we stand ready to adjust all of our instruments within our mandate to ensure that inflation stabilises sustainably at our medium-term target and to preserve the smooth functioning of monetary policy transmission.

We are now ready to take your questions.

* * *

My first question would be on the rate cut, so 25 basis points. Has that been backed by everybody? And has there been a discussion about potentially cutting by 50? And then I would like to know your assessment about the reinflationary or disinflationary effect of tariffs, because there the jury seems to be still out, but you seem to rather err on the side of that it has disinflationary effects, if I’m reading through your statement. Perhaps you could tell me if I’m right?

I can confirm to you that the decision to cut rates by 25 basis points was a unanimous decision. Options were debated, but there was no one to argue in favour of a 50-basis-point cut, for instance. So 25 basis points was definitely the rate cut on which all in the room agreed. I will happily address the issue of why we actually cut rates, because I think it’s a twofold rationale, but looking at today and the tariffs debate that is going on, as well as the tariff impact that is actually happening, we know that it’s a negative demand shock. We can anticipate that it will have some impact on growth, but the net impact on inflation will only become clearer over the course of time. And there are diverging views as to the short-term and the longer-term impact of the development of circumstances, because let’s be clear: we have a lot of uncertainty still today, and there will be many decisions and many implementations that will take place over the course of the next few weeks and months that will be decisive to err in one direction or the other. But I think the net impact of inflation will become clearer over the course of time.

In your policy statement and also in your remarks now, you no longer characterise the policy stance on the restrictive/neutral/accommodative spectrum. I would be quite interested in why you decided to do that and what kind of conclusions we are to draw from that. And following on, I would like to know whether the direction of travel, as you so often have said, is still clear on policy ahead. And then I want to pick up on what you said just now about options being debated. Would you care to elaborate a little bit more on what kind of options were debated?

Your first question, I think, is very relevant because we did remove from the monetary policy statement a sentence that referred to the restrictiveness and, in particular as lately qualified, the “meaningful restrictiveness” or not. And while that assessment of the restrictiveness was meaningful or made sense to the extent that we were very far away from destination, it is meaningless at this point in time. Meaningless because assessing restrictiveness relies heavily on the comparison between the policy rates and the neutral rate, and I think I had the opportunity in front of this esteemed group to give you my views and, I think, the views that are shared by many of us on the Governing Council concerning the neutral rate. Our view – my view certainly – is that the neutral rate, apart from the measurement issues associated with it, is a concept that works for a shock-free world. That’s how it is described. And anybody in this room who thinks that we are in a shock-free world would, I suggest, maybe raise their hand or have their head examined. But we are not in a shock-free world. That’s for sure. So that assessment of the restrictiveness is not operative anymore. And what we need to do is to determine the appropriate monetary policy stance that will actually take us to our destination. And I will not comment on the direction of travel. I will comment on the destination that, as you know, is our 2% target in a sustained manner. I think given the cloud of uncertainty that we have and the multiple decisions that are expected, or lack of it, in the next few weeks and months, our stance will have to be determined by two key attributes. The first one is readiness. We must be attentive to all the developments, and in particular the development of those new shocks, and be able to make the appropriate determination. The second one is agility. Given the speed at which we see developments, the impact they have and the spillovers that we can analyse, it’s not going to be a question of rushing to a particular stance, but it will be a question of agility in the face of what we are seeing. And that will require a cohesive approach that will be based more than ever on the analysis of data. So, as I have said repeatedly, we need to be data-dependent and we need to decide meeting-by-meeting, and we do not have a predetermined path. I know this has been annoying for some, because there’s nothing like having a bit more certainty and anticipating where it’s going. But more than ever now, we need to be data-dependent, and we need to rely on safe, reliable data. We are going to be particularly attentive to all that at the moment, and we will decide meeting-by-meeting. What is certain is the destination, and we are determined to take whatever measures will be appropriate and to use whatever instruments will be appropriate to arrive at that destination.

You asked me about the debate. We always debate, and we debate on all sides of the decision that we ultimately arrive at. In total candour with you, there were a number of governors who a few weeks ago would have argued in favour of a skip. “Uncertainty and the halo of fog around our navigation call for a skip, and then we will decide when we have more data and the projection exercise that is built with the central bank and the national central banks together”. So that was on one side of the debate, if you will. And there were some who said “Well, it might warrant a 50, but at the end of the day, this is not what I’m arguing for”. So I say “debated”, but there was not any single argument in favour of arriving at 50 basis points. So it was a very strong 25 rally by everybody. But we debate, and we hypothetically try to figure out “what it would have been if” or “what it would imply if”. I’m sure that you will all do your homework to find out who said what and all the rest of it. But I can assure you that it was a unanimous rally of about 25 basis points.

My first question is about the outlook. A couple of weeks ago in parliament you presented some numbers on the possible impact of a trade war. I wonder if you have an update for us and whether there was such an update made in the Governing Council. Quite a lot has changed. I’m especially interested in what you make of the tariffs and also sharply lower energy prices and significant appreciation of the euro. These all change quite a bit for you. My second question is about your relationship with the Federal Reserve. And I’m asking this because just moments before the decision itself, of course, the US president came out and criticised the Fed, which raises questions about Fed independence and whether the Fed can remain independent. So the question for you is: do you think there is a risk that central banks around the world start to lose independence in this current environment? You have a really important relationship with the Fed, with the swaps. Are you confident that the swaps remain in place, they’re safe and that you can rely on them, and are you making any sort of contingency plans in case the Fed changes policy on those?

Your first question had to do with whether or not I quantify the current situation relative to the previous assessment of the situation. I will characterise it as follows: we are in the presence of a negative demand shock – no question about that – but this is not in and of itself. And let me be clear on that: when I say we are in the presence of a negative demand shock, some of the tariffs are already in place, and from an average tariff of less than 3%, we are now in the presence of around 13% in terms of customs duties on goods. So that’s what we face now, but we also have the prospect of something that could be far more impactful, number one. Number two, there is a series of potential responses on the part of the Commission. We know one or two or three of them, depending on the tactic that is adopted. I think the most obvious one, which has been commented and actually put on the table, is the zero-for-zero tariff offer that has been made. Second, there will likely be – and that really falls in the category of our risk assessment – some redirection and rerouting of goods that will be supplied by markets that are subject to much higher tariffs, even as we speak now, and possibly other destinations from which those goods could be rerouted to Europe. And third, there are other policies that are also in play and being discussed, including in particular in Germany. So fiscal policies that would see significant investments and significant fiscal impulse that would be given. So you have a combination of either policies or threats of policies of different categories that will obviously have an impact on the situation. Added to which, and you alluded to it, and we actually refer to it in the risk statement, there is the appreciation of the euro, which we mentioned specifically in the Monetary Policy Statement, and there has been a significant decline in the price of commodities and particularly the price of energy. So you have to combine all that and anticipate that there will be development, which will lead me to not actually give you a specific quantification of the impact. Suffice to say that there will be a negative impact on growth, possibly. And, as I said, the impact on inflation and the net impact on inflation is less than clear at this point in time. So there is so much ongoing, some of which will probably settle a bit by our June meeting, but given that the 90 days will only elapse around 9 July and 14 July – Bastille Day – we will know more on that front and on the fiscal front. Clearly, the incoming of new governments in various countries, including in Germany, will also take us to more clarification on exactly where the situation will evolve. But, as I said earlier, there is no better time to be data-dependent. There is no better time to rely on very strong and solid analysis by all our staff, and I’m glad that the June projections are going to be a combined exercise of the ECB and the national central banks, who will be confronting their respective viewpoints and analyses to arrive at something that will be really consolidated around our three key analytical underpinnings, which are the inflation outlook, underlying inflation and transmission.

You asked me about the Fed. Let me just say very squarely that I have a lot of respect for my esteemed colleague and friend, Jay Powell. We have a steady, solid relationship amongst central bankers. I think that that relationship is decisive in order to have a solid financial infrastructure to make sure that there is financial stability. We have demonstrated in the past that we could actually operate on that basis of consultation and understanding of the financial risk, and we will continue doing so in an undeterred and unchanged manner, I’m sure.

Do you think that cancelling the tariffs might be enough to restore the trust in the United States now? We have seen this mistrust in the dollar, in Treasuries and so on. Or don’t you think that the environment is getting worse and this is also destroying the faith in the United States? I’m speaking about the attack on law firms, judges and universities. The certainty of law is vanishing in America. Do you think that this is also impacting on the trust in America? And my second question is: the US administration seems to have also the ambition to push stablecoins a lot. How dangerous might this be for the euro if we imagine, for example, big companies like Amazon, Facebook and so on issuing and launching these stablecoins, of course backed by the dollar?

There is a nice African saying which goes “you never swim twice in the same water”. I think for economic players, investors, consumers, employers, employees and all categories, confidence, predictability and a reasonable level of certainty are important factors for them to make decisions. I will concentrate on the European Central Bank. In the mandate that we have of procuring and maintaining price stability, we will certainly make sure that we respect those principles. Predictability, confidence, all based on access to the data, the right data, the safe data, and in as much transparency as is possible with all of you. I think this has been recognised by many investors. And this is a clear answer to your question.

On the issue of stablecoins, you know that we have regulation in place. It’s called MiCA. It is effective. It’s currently under review and consultation for possible improvements, and I’m delighted that this is the case because we are facing a constant evolution of those digital payments, of those cross-border payments, of those stablecoins – which I would put in a very separate category within cryptoassets – so the stablecoins are a different animal. And clearly having a good, solid regulation that constitutes the framework within which they can operate is paramount and has been understood by the European Union, by the Commission, by various authorities in charge of those matters, and will be reviewed in order to make sure that it procures a safe harbour for those initiatives. But let me take the opportunity here to acknowledge that, for the first time in our Monetary Policy Statement, we refer to the digital euro, and that should be a clear signal that not only do we stand ready and do the hard work that is incumbent upon us, but it also acknowledges the fact that other European authorities are hopefully going to accelerate the pace at which we can deliver.

I have one question on the restrictiveness – or the lack of description of restrictiveness – in the policy statement. Have you discussed – and can you share your wider views on this – how much it takes for the ECB to switch into a stimulative stand over the coming months given all the headwinds and clouds over growth, and how willing would you be to do so if necessary? And my second question is on financial stability and in particular your views on the independence of large central banks. How key is it for financial stability that large central banks like the ECB and the Fed are and remain politically independent?

We did not discuss the matter of stimulation and we certainly rallied around the statement that is in the monetary policy overall statement that we will take the appropriate monetary policy stance and decisions in order to make sure that we deliver on our commitment to reach our medium-term target of 2% in a sustainable manner. So obviously the degree of appropriateness will be measured and exercised through these two principles – readiness and agility – in the face of the uncertainty and the multiple decision points, which are external factors, and which for some of them constitute new shocks that are facing the European economy.

On your latter point concerning the independence, you know that within the euro area and within Europe, it is particularly important. It’s actually one of the criteria used in the convergence assessment that applicant new members have to go through. So if a new member who applies to join the euro area does not evidence the independence of their central bank, both in its legislative foundation and in its operations, that’s an obstacle to joining the euro area. So, for us here, independence of central banks is fundamental.

I just want to recall history on these trade tensions. In 2019, your predecessor Mario Draghi stood here and said there are major downside risks in the face of US-China trade tensions at this time. And in September, the ECB responded with a stimulus package. So given the broader conflict that we are facing, is it now just a matter of time before the ECB will take further action in response to these tensions? You told us about readiness and agility, so we are curious. And the second more broad question: since 2022 in February, the ECB has repeatedly condemned the Russian aggressive and “unjustified” war against Ukraine, and you did it today in your statement. How would you characterise this trade war, now that has been launched by Trump against economic partners? Because you talk about tensions, but we journalists, we call a spade a spade. It’s a trade war. So how do you characterise this kind of other war?

On your first point, we will determine our monetary policy stance on the basis of what is appropriate in order to reach our target. We will do that demonstrating effectiveness and agility: analysing the nature of the shock, the kind of responses that it requires, and doing so in a prompt manner. The downside risks are clearly stated. If you look at the paragraph I read for you earlier on, the downside risks are clearly identified in relation to growth. Will those risks materialise? When will they materialise? It will be a factor of how decisions are made, which decisions are made, what trade measures will be taken, what countermeasures will be adopted, whether there is an escalation as a result. And as I addressed earlier: What kind of rerouting will we be seeing? What measures will be taken to prevent this massive rerouting if necessary? What national and European fiscal decisions will be made over what period of time? When you inject €800 billion in the economy, or near €1 trillion, it’s not a small feat. It’s a serious impulse and it has a serious effect, certainly on growth, and to be seen on inflation, but this will be for later analysis when we have more information and more data on these particular matters. I’m not going to characterise what’s happening at the moment. I think that the commentators, the top-notch economists who specialise in trade matters, all agree that it will have downside consequences. The consequences will differ depending on which part of the world you stand. And that really justifies the fact that monetary policy decisions are not going to be the same the world over.

My first question is on uncertainty. You used various degrees of uncertainty in your wording last time and this time as well. Would you say that we are past peak uncertainty now that tariffs play out in the open or is it too early to tell? And my second question is on the exchange rate, which I’m aware you are usually hesitant to comment on, but the movements are so big that you are even mentioning it repeatedly. So how would you characterise the recent movements in the exchange rate? Do you expect a stronger euro to last, or is it just a temporary episode?

I cannot tell you whether we are at the peak of uncertainty. There is a negotiation, which is ongoing. Players around the tables have stated their position. Proposals have been made, at least on one side, but all of that could change. There’s a degree of unpredictability, which adds to the uncertainty, and if you add to that the incredulity that we’ve had, certainly in the first phase where it was difficult to assess and understand, because it was such a break from previous conventional wisdom as to how trade relationships are organised, as was discussed by the WTO yesterday, that I don’t know whether we are at the peak. What I know for a fact is that the European Central Bank and the Eurosystem, in our monetary policy decisions, we have to stand ready for the unpredictable, which is why I think it makes a lot of sense to be ready, to be agile, to work on reliable data, and to operate on a meeting-by-meeting basis. We meet about every six weeks. Think about the number of changes that have taken place in the last six weeks. There could be more changes in the next six weeks, but that’s in the nature of our job: to stay focused on our mandate, to analyse what is coming at us, and to draw conclusions in order to make the appropriate monetary policy decision that will take us to target. That’s what we will do, and we’re not going to move away from that.

You asked me another question on the exchange rate. We are not targeting any particular exchange rate. I’ve given the same answer a thousand times here. But we do mention, in the risk assessment in the second paragraph, we say “increasing global trade disruptions are adding more uncertainty to the outlook for euro area inflation. Falling global energy prices”, that’s one, “and an appreciation of the euro could put downward pressure on inflation”. So we do mention it because of the occurrence, the magnitude, and we try to account for it in the assessment that we make for our monetary policy decision. This is what happens.

Does your inflation analysis contemplate Europe retaliating at any point, or you don’t speculate about these things? And I mention this because I’m especially worried because digital services could be targeted, and I know you’re always very attentive to the service element on inflation. My second question: it seems the ECB will be diverging again from the Fed. What are the main differences here and there, and at both sides of the trade war, that could allow you, and not Mr Powell, to keep lower interest rates?

We have a methodology to take into account developments, and the level of scrutiny is high, whether it is completely legislated or so certain in its outcome that we can actually take it into our exercise and the analysis that we do. When we are not too sure, we constantly do some scenario analysis to assess and estimate what the impact would be of such or such other decisions. And that exercise will be intense in the next few weeks and will give rise to some very serious results at our June projection meeting, as I said, thanks to the consolidated exercise between NCBs and ECB. But currently, if you ask me about the countermeasures, they are not included in the baseline that we have. Obviously, we look at the entire trade balance, we look at goods, we look at services. This is pretty obvious to anyone. We cannot look only at goods or only at services, so I do pay attention to services, but I look at goods as well. The two are intrinsically the outcome of the economy and the trade movements that we have with other parts of the world, so I look at both. I think each central bank in the world does its job in good conscience on the basis of its mandate and on the basis of the currency that it is in charge of and the territory in which it has competence. So that leads us to look at the euro area not in isolated form because we are open to the rest of the world and more open than many other economies, including the United States for that matter, but we look at that, we are focused on the euro and we are focused on our price stability mandate. The other central banks in the world have a different mandate, they have a dual mandate for some of them, and clearly their macroeconomic situation is different and they will be on the receiving end of a different nature of shocks than the shocks that we will be receiving. So that leads us necessarily to drawing different conclusions. It is a different situation.

I wanted to mention something that nobody asked me about. I want to call your attention to one particular segment of our monetary policy statement that you will see, which we have debated and which actually is a clear message from us, the central bank, to the other European institutions. And this is the paragraph which sometimes is considered as business as usual. This time around, we do specifically mention, with a special timetable associated with it and the swift implementation that we expect, that there are three categories of structural efforts on the part of Europe. One is the Competitiveness Compass, which is a derivative of the Draghi report. Number two is the savings and investments union, which I’ve repeatedly called the capital markets union. And number three is the digital euro. I think we’ve taken the view that this is a moment for Europe to not only be solid on its monetary policy, and not just for us to deliver on price stability, but for the Europeans altogether and the European institutions to actually focus on what opportunities there are, what changes need to take place, and at which accelerated pace this should happen. So that’s a strong message from us to colleagues, friends, and other decision-makers in Europe.