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Despite slightly higher growth and inflation forecasts, Lagarde struck a cautious tone, stressing high uncertainty and avoiding forward guidance. The ECB is watching services inflation and wages and starting to assess AI’s impact. Barring surprises, a prolonged pause with the deposit rate at 2% through 2027 looks likely.

After the fastest monetary tightening cycle in decades (2022-2023), the main central banks have begun a process of lowering interest rates, with the “last mile” characterized by a cautious approach.

The ECB struck a more positive tone than in September, showing greater confidence in growth despite global uncertainty. It considers the 2% deposit rate appropriate and, unless incoming data materially change the outlook, appears ready to maintain its stance well into next year.

The focus of Thursday’s ECB monetary policy meeting was not so much on the interest rate decision (already priced in by analysts and markets, who expected the deposit rate to be unchanged at 2%), as on the hints that Christine Lagarde could give regarding what the central bank will do next.

At her press conference on Thursday after the ECB meeting, President Lagarde said goodbye to journalists and listeners wishing to hear more about a ‘wait and see’ holiday, an expression widely used by central bankers to imply that the next monetary policy moves will depend on how events unfold.

Lagarde cooled expectations of another rate cut this year, reinforcing a more cautious, data-dependent stance. If the global outlook holds steady and no surprises arise in inflation or activity, the ECB may have already reached the end of its easing cycle.

The most interesting thing about last week’s ECB meeting was not the decision made, but the promise of hints as to what it might do next. Ultimately, the 25-basis point cut in the main reference rates had already been widely priced in by analysts and markets.