We heard from Lagarde last week in the ECB press conference so we’re not breaking any new ground here. The market is pricing in just a 20% chance of a cut this year at any point.
- We expect inflation to stabilize at our 2% medium term target
- Our data dependent approach serves us well in the current environment
It’s tough to get excited about ECB policy right now or what is happening in the Eurozone economy but maybe that’s the point. It’s a low-drama economy right now and that’s what a big part of the market is looking for. European stock markets are up 2-4% so far this year and the euro is up 1.3% against the dollar.
You don’t have to lay awake at night worrying about the leader blowing up a trade deal or threatening to invade someone. Moreover, the valuations are much lower than the US tech scene, which is another source of unwanted volatility.
At the ECB press conference on 5 February 2026, Christine Lagarde announced that the ECB held interest rates steady for a fifth consecutive meeting, describing monetary policy as being in a “good place.” Headline inflation had fallen to 1.7% in January, but Lagarde downplayed the undershoot as temporary, stressing the ECB remains focused on its medium-term 2% target.
On growth, she noted that services — particularly information and communication — have been the main driver, while manufacturing has remained resilient despite trade headwinds and construction momentum is picking up. She highlighted rising business investment in AI and digital technologies as a key story behind domestic demand. On the euro’s appreciation, Lagarde reiterated that the ECB does not target exchange rates but acknowledged its importance for the growth and inflation outlook. She also welcomed the nomination of Kevin Warsh as Fed Chair and called for deeper EU structural reforms to unlock the continent’s economic potential.
