European Central Bank (ECB) president Christine Lagarde has said that rate-setters will probably lift their growth forecasts for the euro zone when they meet next week, in the latest sign of the economy’s resilience.
Pointing to the ECB’s previous upgrade to the economy’s outlook in September, Lagarde told the Financial Times in an interview that “my suspicion is we might do that again in December”.
In September, the ECB raised its forecast for euro zone gross domestic product (GDP) for 2025 to 1.2 per cent, from a prediction of 0.9 per cent in June. It was the first upward revision to growth projections since March, 2024.
Speaking to the Financial Time’s Global Boardroom conference on Wednesday, Ms Lagarde said: “The euro zone area is resisting better than what we had anticipated back in April.
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“When the tariffs hit, when uncertainty grew, when war was raging, everyone thought that growth in the euro area would fall very badly, and this hasn’t been the case.”
Ms Lagarde declined to give further details on the growth forecasts that the ECB will release on December 18th, when the central bank is expected to hold its benchmark interest rate at 2 per cent.
[ Investors increase bets on ECB rate rise in threat to dollarOpens in new window ]
The euro zone economy has fared better than expected in the face of US President Donald Trump’s trade war. It grew 0.2 per cent in the third quarter, surpassing economists’ forecasts, helped by increased investment in digital services.
In recent days, investors and traders have ratcheted up bets on rate rises from the ECB and other major central banks next year, pointing to a mix of persistent inflation and resilient economic growth.
Following Ms Lagarde’s comments, traders modestly raised their bets on the ECB lifting interest rates by the end of next year, putting the probability at almost 50 per cent, according to levels implied by swaps markets.
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Dominic Bunning, head of G10 currency strategy at Nomura, said Ms Lagarde’s remarks added to a “very clear shift in tone in the past few weeks from a range of [ECB] policymakers”.
The ECB will also release new inflation forecasts next week. Inflation in the euro zone rose to 2.2 per cent in November, exceeding the central bank’s 2 per cent target for the third month in a row.
Ms Lagarde said: “The whole economy is faring better. Is it as good as it should be? We are, I think, quite close to potential, but there’s a lot to be done in terms of improving the situation and improving the productivity of the euro area.”
However, she pushed back against French president Emmanuel Macron’s recent suggestion to rethink the priorities of the ECB to boost the single market.
The ECB president said that, while it might be “interesting” to consider a potential change in the EU treaty that defines the central bank’s role, its current mandate to keep inflation in check was “pretty clear”.
She also stressed that even very low interest rates or quantitative easing would not “change the barriers” to growth in Europe, adding that central banks around the world were often used as “scapegoats” by politicians.
Mr Macron was quoted in a recent interview with the French newspaper Les Echos as saying: “Reasserting the value of the European interior market, that entails not only having inflation as our sole objective but also economic growth and employment.” – Copyright The Financial Times Limited 2025
