The eurozone economy performed better than expected, raising the chances that the ECB will raise its growth forecast at its meeting next week. Christine Lagarde said business sentiment and employment data showed the economy was growing close to its potential despite trade tensions and global competition.
Investors had previously expected a slowdown in the US tariff row. The euro strengthened despite challenges from China, but actual data showed the domestic economy was more resilient. Lagarde said the previous forecast had been raised, and there was a chance it would be raised again.
Lagarde reiterated that monetary policy was on track, indicating there was no need to change interest rates. This was consistent with market expectations that saw almost zero chance of a rate change on December 18.
While President Macron has pushed for more supportive policies towards growth, Lagarde stressed that rate cuts would not solve structural problems such as internal barriers that constrain the movement of goods and capital. According to her, these issues cannot be solved through monetary policy.
He added that it would be appropriate to consider changing the ECB's mandate in the EU Treaty, but stressed that the debate on the balance between growth and price stability should continue.
