The eurozone economy likely grew in the first quarter, European Central Bank (ECB) Governor Christine Lagarde said at a press conference following the regulator’s April meeting.
Meanwhile, downside risks to GDP growth have increased and heightened trade disruptions have heightened uncertainty about the inflation outlook, she emphasised.
“In the current geopolitical environment, it is even more important that fiscal and structural policies enhance the productivity, competitiveness and resilience of the euro area economy,” Lagarde said.
Manufacturing in the currency bloc has shown signs of stabilising, but market reactions to trade tensions could put pressure on demand, she said.
The impact of new US duties on eurozone inflation is still unclear and will only become clearer later, but there will still not be complete clarity before the ECB’s June meeting, the regulator’s chief said.
“We are not in a shock-free world, that’s for sure,” she said and recommended to “check the head” of all those present at the press conference who think otherwise. The words were uttered in the context of a discussion of the neutral rate, which Lagarde believes only works in a shock-free world.
The ECB on Thursday expectedly cut all three key interest rates by 25 basis points. According to Lagarde, the decision was unanimous and a 50 bps cut was not discussed. At the same time, several weeks ago, a number of members of the Governing Council suggested a pause in the reduction of rates, said the head of the regulator.