Key Points

• This week, CNBC engaged with numerous European Central Bank policymakers who highlighted advancements in tackling inflation but acknowledged potential risks posed by tariffs.

• According to ECB President Christine Lagarde, the “disinflationary process is so much on track that we are nearing completion,” though the influence of tariffs “will depend on what countermeasures are eventually taken by Europe.”

• Klaas Knot, president of the Netherlands Bank, stated, “In the short run, we will have lower growth. We will probably also have lower inflation.”

Guests and attendees mingle and walk through the atrium during the IMF/World Bank Group Spring Meetings at the IMF headquarters in Washington, DC, on April 24, 2025.

Jim Watson | Afp | Getty Images

After years overshadowed by the pandemic, supply chain issues, energy concerns, and inflation, a new subject has taken center stage at this year's World Bank and International Monetary Fund Spring Meetings: tariffs.

The IMF set the scene by launching the week with its latest economic forecasts, which revised down growth expectations for the U.S., U.K., and many Asian countries. While economists, central bankers, and politicians engaged in panels and behind-the-scenes discussions, many are attempting to discern whether trade tensions between China and the U.S. are — or perhaps are not — easing.

This week, European Central Bank policymakers who spoke with CNBC generally maintained a dovish tone, suggesting they expect interest rates to continue falling and see minimal upside risks to euro zone inflation. Nonetheless, they all emphasized the current high levels of uncertainty, the necessity of ongoing data monitoring, and the significant risks to the growth outlook — sentiments echoed by Bank of England Governor Andrew Bailey in his interview with CNBC on Thursday.

These were some of the key messages from ECB members this week.

Christine Lagarde, European Central Bank president

On inflation and monetary policy:

“We’re on track to meet our [inflation] target by 2025, indicating that the disinflationary process is nearing completion. However, we face shocks, and these shocks will dampen GDP, acting as a negative shock to demand.”

“The net effect on inflation will depend on what countermeasures Europe eventually implements. We must also consider the [German] fiscal push from defense investments and the infrastructure fund.”

“We have observed successive movements, announcements [of U.S. tariffs], followed by a pause, and then some exemptions. Therefore, we must remain vigilant... Either we cut, or we pause, but our decisions will be extremely data-dependent.”

On market moves:

“When we made our projections, we anticipated that... the dollar would appreciate, while the euro would depreciate. However, that’s not what we observed. There have been some counter-intuitive movements across various categories.”

“The German market has been positively surprised by the forthcoming program from the German government, which includes commitments to defense and a substantial fund for infrastructure development.”

Klaas Knot, The Netherlands Bank president

On tariff uncertainty:

“Reflecting on the past 14 years, the uncertainty we experienced at the beginning of the pandemic is comparable to what we are facing now.”

“In the short term, it’s evident that the unpredictability of the U.S. government’s tariff actions serves as a significant negative factor for growth. Essentially, uncertainty acts like a tax without generating revenue.”

On the inflation impact:

“In the short term, we will see slower growth. We will probably also experience lower inflation. Additionally, we notice that the euro is appreciating as energy prices have decreased. So, combined with the negative factor of uncertainty in the short term, it’s clear that it will accelerate the disinflation.”

“However, in the medium term, the inflation outlook is not entirely clear. Negative factors persist, but in the medium term, retaliation may occur. Global value chain disruptions could also lead to inflationary pressures in regions beyond just the U.S. Furthermore, Europe’s fiscal policy plays a role. This is a time when projections are necessary.”

On a June rate cut and market pricing for two more ECB rate cuts in 2025:

“I’m open-minded. It’s too early to take a definitive stance on June, whether it would involve another cut. It will depend entirely on these projections.”

“I need to see a more structured analysis of the impact on the upcoming inflation profile before determining whether the market pricing is fair or not.”

Robert Holzmann, Austrian National Bank governor

On the need to wait for more data and news on tariffs:

“We haven’t encountered this level of uncertainty for years... unless the uncertainty is resolved through appropriate decisions, we will have to delay several decisions, and thus, we don’t yet know the best direction for monetary policy.”

“Before delving into the data, the question is, what political decisions will be made? Will there be some tariff increases? Will there be significant tariff hikes? Will there be retaliation with high counter tariffs?”

On the ECB’s April rate cut:

“I believe there’s a broad consensus [on rates]. However, at the margins, opinions differ.”

“In my view, at this time, it wasn’t clear to what extent [tariff] countermeasures were being implemented. With countermeasures in Europe, prices might have risen. Without countermeasures, price pressure is likely downward. For now, we don’t know the direction.”

On the direction of interest rates:

“If recent discussions about a trade arrangement prove accurate, then prices will likely trend downward rather than upward. However, different decisions could alter this outcome, potentially reversing the direction. For now, it seems downward.”

“Further cuts may occur this year, but the exact number remains uncertain.”

Mārtiņš Kazāks, Bank of Latvia governor

On opportunity from tariffs:

“Amidst all this uncertainty and vulnerability, Europe also faces opportunities.”

“It’s a time for Europe to embrace its potential as an economic superpower and to evolve into a fully-fledged political and geopolitical superpower, which requires completing decisions that were previously left unfinished.”

“Achieving this requires political will and courage to make those decisions, strengthening the European economy and asserting its place in the global arena.”

On market reaction to tariffs:

“So far, things seem relatively orderly... but when considering the spillovers to Europe, the financial markets are functioning more or less smoothly, and we haven’t observed any dramatic spread widening.”

“However, regarding the macro scenarios, this uncertainty is extremely high, as the potential outcomes and their probabilities are quite similar to the baseline [tariff] scenario.”