Christine Lagarde is expected to remain cautious on interest rates.

According to economists’ forecasts, ECB President Christine Lagarde is expected to maintain a cautious stance on monetary policy by leaving interest rates unchanged and signaling no intention to cut rates either in December 2025 or during 2026. This is what markets are expecting to hear from the ECB president’s speech, which will be delivered today in Frankfurt.

Meanwhile, the ECB’s updated projections may point to a more favorable outlook for economic activity, with GDP growth forecasts potentially revised higher, particularly for the current year.

Financial markets, however, may be underestimating the risks to the euro-area inflation outlook posed by the sharp rise in US tariffs. While the ECB is expected to keep rates on hold for now, the balance of risks heading into next year appears skewed to the downside.

Hence, any unexpected shift in tone could trigger sharp moves in the euro and euro-area bond yields, as investors are largely positioned for a cautious and unremarkable message from Lagarde. Low implied volatility and muted positioning could further amplify the reaction, as traders rush to reassess the ECB’s policy path beyond 2025.

Benedetta Zimone