ECB lowered interest rates by 25 bps, in line with markets expectations. Here are the ECB chair, Christine Lagarde remarks on eurozone economic growth, inflation and tariffs.
- Spending on new European defense programs can stimulate economic growth and industrial sector
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The disinflation process is progressing in line with previous expectations. Inflation forecasts for the coming years have been slightly revised upward due to energy price dynamics (2025: 2.3%, 2026: 1.9%, 2027: 2%). Monetary policy is becoming less restrictive as planned.
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Real wage growth signals a recovery in consumer demand within the Eurozone.
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The EU economy recorded modest growth in Q4 2024, with a similar trend continuing in 2025. Industrial activity remains a drag on the EU economy despite improvements in PMI indicators, while the services sector remains on solid ground.
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The main challenge remains the low level of corporate investment, driven by high geopolitical uncertainty.
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Demand for labor has visibly slowed in 2025, further reducing inflationary risks stemming from wage pressures in the labor market.
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More spending would be a boost to European economy. Uncertainty is huge. The ECB needs time to understand the impact from tariffs. Must understand defense plans before passing judgment.
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If data will signal a pause, ECB will do it. The ECB is not pre-commiting and will decide based on data.
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Loan growth is picking up. Defense and infrastructure spending could raise not only growth but also inflation. Geopolitical tensions create two-sided inflation risk and are a major source of uncertainty.
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As for now, risks for growth are titled to downside. Recent wage deals point to continued moderation to wage pressures. Most inflation expectations gauges support return to 2%.
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Domestic inflation is still high, but uncertainty has risen, to damp the economy.
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Exports are to benefit from global demand, barring tariffs. Employment growth in Eurozone was subdued in January and February. Consumers confidence is fragile.
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Services are resilient and support the consumer spending trend, but labor demand has moderated.
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