MNI BRIEF: Price Risks Contained In Both Directions - Lagarde

Eurozone inflation risks appear quite contained in both directions, European Central Bank President Christine Lagarde said in a speech on Tuesday, adding that as new information has become available the range of risks on both sides has also narrowed.

However, Lagarde admitted that there are plausible scenarios which could push inflation off track in either direction, citing reigniting trade tensions and higher spending on defence equipment. Growth risks remain tilted to the downside but are now more balanced, she said.

“If we consider the ‘known knowns’, the risks appear well bounded. But there are also ‘known unknowns’ – above all, how euro area companies will adapt to this new setting,” she said, adding that “unknown unknowns” are always a possibility in a new world dominated by what she called “geo-economics.” 

The ECB’s assumptions on the impact of tariffs last December have not taken materialised, as tariffs are not an isolated economic event but part of a broader geopolitical shift which models could not capture, Lagarde said.  (See MNI SOURCES: Doubts Over EU Carbon Pricing Key For ECB Rates)