Lagarde speech: EU retaliatory measures and a weaker Euro could lift inflation by around 0.5%

European Central Bank (ECB) President Christine Lagarde is testifying before the Committee on Economic and Monetary Affairs of the European Parliament on Thursday.

Key quotes

We are determined to ensure that inflation stabilizes sustainably at our 2% medium-term target.

We will follow a data-dependent and meeting-by-meeting approach.

The brunt of the impact on economic growth would concentrate around the first year after the rise in tariffs.

It would then diminish over time, however, leaving a persistent negative effect on the level of output.

EU retaliatory measures and a weaker Euro exchange rate could lift inflation by around half a percentage point.

The effect would ease in the medium term due to lower economic activity dampening inflationary pressures.

Estimates are subject to very high uncertainty.

ECB analysis suggests that a US tariff of 25% on imports from Europe would lower euro area growth by about 0.3 percentage points in the first year.