The ECB kept interest rates at current levels without giving a clear signal about its next steps, although investors expect additional support to be needed as inflation is expected to fall below target next year. ECB President Christine Lagarde stressed a cautious approach, looking at all sides, and not favoring either too hard or too soft policies.
Lagarde clarified that the Transmission Protection Instrument (TPI) was not under discussion, stressing that the integrity of eurozone economic data remained high after the previous Greek experience. She also said that the eurozone sovereign bond market was functioning smoothly, and the ECB was ready to use its tools if the financial transmission mechanism was disrupted.
In a press conference, Lagarde said the disinflation process was over, but the ECB would continue to take a data-driven approach from one meeting to the next. She also stressed that the decision to keep interest rates on hold was made unanimously by the Governing Council.
The ECB sees risks to growth now more balanced: trade uncertainty has subsided, but high tariffs, a strong euro, and global competition are expected to weigh on growth in the short term. However, increased public spending, productivity reforms, and a recovery in business confidence could stimulate growth next year.
