FRANKFURT, Feb 5 (Reuters) – The European Central Bank left interest rates unchanged as expected on Thursday and offered no clues about its next move, reinforcing market bets that policy will remain steady for some time as the bloc enjoys steady growth and near-target inflation.
Following are highlights of ECB President Christine Lagarde’s comments at a news conference after the policy meeting.
ON TRUMP’S NOMINATION OF KEVIN WARSH FOR FED CHAIR JOB
“I have known him for a long, long time – back in the financial crisis days where he was in public service, and I was minister of finance at the time. So we go back a long way, and I very much welcome the announcement (of his nomination).”
STILL IN GOOD PLACE
“I would certainly argue that we are in a good place and inflation is in a good place. “
REPO LINES
“We are looking at our liquidity framework – and that the repo line to be distinguished from the swap lines – the repo lines are in progress in terms of reframing them, opening up the access, and making them more attractive to other national central banks.”
EXCHANGE RATE DISCUSSED
“I just want to remind you, and this will not come as a surprise, that we do not target an exchange rate in terms of policy target. But we also recognise that it is important for growth and inflation outlook, both.
“So, for that reason, we always keep a close eye on exchange rate developments, and the Governing Council discussed this matter today.”
“What we observed collectively is that the dollar has depreciated measurably against the euro, but not in the last few days, but since March 2025.”
“We concluded that the impact of exchange rate appreciation since last year is incorporated in our baseline, okay, but of course, as I said, we always monitor whether the impact is passing through.”
RISKS BROADLY BALANCED
“We are… in a broadly balanced situation when it comes to risk assessment. And some risks have ticked up, others have ticked down, but on balance… we believe that we are in a broadly balanced situation at the moment.”
STRONGER EURO
“A stronger euro could bring inflation down beyond current expectations, more volatile and risk averse, financial markets could weigh on demand and thereby also lower inflation.”
UPSIDE INFLATION RISKS
“Inflation could turn out to be higher if there were a persistent upward shift in energy prices, or 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. If wage growth moderated more slowly, services inflation might come down later than expected.
“The planned boost in defence and infrastructure spending could also cause inflation to pick up over the medium term.”
DOWNSIDE INFLATION RISKS
“Inflation could turn out to be lower if tariffs reduce demand for euro area exports by more than expected, and if countries with overcapacity increase further the exports to the euro area. Moreover, a stronger euro could bring inflation down beyond current expectations. More volatile and risk-averse financial markets could weigh on demand, and thereby also lower inflation.”
UNDERLYING INFLATION
“Indicators of underlying inflation have changed little over recent months and remain consistent with our 2% medium-term target.”
“The outlook for inflation continues to be more uncertain than usual on account of the volatile global policy environment.”
WAGE GROWTH
“Negotiated wage growth and forward-looking indicators, such as the ECB’s wage tracker and surveys on wage expectations, point to a continued moderation in labour costs. However, the contribution to overall wage growth from payment over and above the negotiated wage component remains uncertain.”
INFLATION EXPECTATIONS
“Most measures of longer-term inflation expectations continue to stand at around 2%, supporting the stabilisation of inflation around our target.”
CHALLENGING EXTERNAL ENVIRONMENT
“Business investment should strengthen further, and surveys indicate that firms are increasingly investing in new digital technologies. At the same time, the external environment remains challenging, owing to higher tariffs and a stronger euro over the past year.”
SERVICES DRIVE GROWTH
“Growth has mainly been driven by services, notably in the information and communication sector. Manufacturing has been resilient, despite the headwinds from global trade and geopolitical uncertainty. Momentum in construction is picking up.”
(Reporting by Reuters Global News Desk)
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