FRANKFURT, Dec 18 (Reuters) – The European Central Bank kept its policy rates steady on Thursday and took a more positive view on a euro zone economy that has shown resilience to global trade shocks.
Following are highlights of ECB President Christine Lagarde’s comments at a news conference after the policy meeting.
AI INVESTMENT
“The investment… based on the surveys that we conduct is largely attributable to the development of AI.
“And AI takes multi-facets, but certainly computer capacity, telecommunication, additional investment in intangible more than tangible CapEx, is really characteristic of what we are seeing at the moment.”
NO FORWARD GUIDANCE
“We are all attentive to uncertainty… whether it’s uncertainty related to geopolitics, whether it’s uncertainty related to the movement of trade from countries with overcapacity, and in particular what happens at the borders of Europe.
“I know everybody would like some forward guidance, but we simply in the current situation, with the degree of uncertainty that we are facing, we simply cannot offer forward guidance.”
CHANGE IN EURO ZONE ECONOMY
“We think that there is some change taking place in our economy and if you look in particular at the drivers and what has surprised us on the upside.
“It’s characteristically investment and it’s not just spending by the public sector.”
INFLATION UPSIDE/DOWNSIDE RISK
“The outlook for inflation continues to be more uncertain than usual on account of the still volatile international environment. Inflation could turn out to be lower if the rise in U.S. tariffs reduces demand for euro area exports and if countries with overcapacity increase their exports to the euro area. Moreover, a stronger euro could bring inflation down further than expected. An increase in volatility and risk aversion in financial markets could weigh on demand and thereby also lower inflation.
“By contrast, inflation could turn out to be higher if more fragmented global supply chains pushed up import prices, curtailed the supply of critical raw materials, and added to capacity constraints in the euro area economy. A slower reduction in wage pressures could delay the decline in services inflation, a boost in defence and infrastructure spending could also raise inflation over the medium term.”
UNANIMOUS DECISION
“We reconfirmed that we are in a good place, which does not mean that we are static.”
“There was a unanimous decision that was taken today concerning the rates that we decided to hold. But there was also a unanimous view that all optionalities should remain on the table and that we would stick to the meeting by meeting data dependent approach with no rate, path set and no set date for any move. And it was a unanimous view around the table”
BASIS FOR RATE DECISIONS
“Our interest rate decisions will be based on our assessment of the inflation outlook and the risks surrounding it, in light of the incoming economic and financial data, as well as the dynamics of underlying inflation and the strength of monetary policy transmission”
“We stand ready to adjust all of our instruments within our mandate to ensure that inflation stabilizes sustainably at our medium term target and to preserve the smooth functioning of monetary policy transmission.”
INFLATION OUTLOOK UNCERTAIN
“The outlook for inflation continues to be more uncertain than usual on account of the still volatile international environment.”
GLOBAL TRADE AND ECONOMIC OUTLOOK
“While trade tensions have eased, the still volatile international environment could disrupt supply chains, dampen exports and weigh on consumption and investment.”
“A deterioration in global financial market sentiment could lead to tighter financing conditions, greater risk aversion and weaker growth.””Geopolitical tensions in particular, Russia’s unjustified war against Ukraine, remain a major source of uncertainty. By contrast, planned defence and infrastructure spending, together with productivity enhancing reforms, may drive up growth by more than expected.”
ON EURO/INFLATION
“A stronger euro could bring inflation down further than expected.”
INFLATION OUTLOOK
“Inflation should decline in the near term, mostly because past energy price rises will drop out of the annual rates. Staff expects it to stay below 2% on average in ’26 and ’27. With energy inflation negative over most of this period and inflation excluding energy gradually declining, inflation should then return to target in ’28 amid a strong rise in energy inflation.”
RESILIENT ECONOMY
“The economy has been resilient. It grew by 0.3% in the third quarter, mainly reflecting stronger consumption and investment.”
UNDERLYING INFLATION
“Indicators of underlying inflation have changed little over recent months and remain consistent with our 2% medium term target.”
WAGE GROWTH
“Surveys on wage expectations suggest that wage growth will ease in the coming quarters before stabilising somewhat below 3% towards the end of 2026.”
TRADE TO DRAG ON GROWTH
“The challenging environment for global trade is likely to remain a drag on growth in the euro area this year and next.”
(Reporting by Reuters Global News Desk)
