ECB Holds Rates Steady Amid Global Trade Uncertainties

European Central Bank President Christine Lagarde highlighted the complexity of predicting the inflationary consequences of ongoing trade tensions during a press conference on Thursday. "There is a lot of uncertainty out there," Lagarde remarked, emphasizing the challenges in forecasting the medium-term inflation trajectory due to global trade disputes.

Inflation Targets at Risk

Despite current inflation rates aligning with the ECB's 2% medium-term target, Lagarde warned of the potential for undershooting. The ECB's decision to maintain steady interest rates during its July 24 meeting in Frankfurt reflects a cautious approach amidst these uncertainties.

Looking Ahead

Lagarde stressed the ECB's commitment to not overreact to minor deviations, focusing instead on the broader medium-term outlook. However, she acknowledged that potential retaliation measures and evolving supply chains add layers of complexity to the inflation forecast.