In a hearing before the European Parliament’s Committee on Economic and Monetary Affairs on 3 December 2025, ECB President Christine Lagarde discussed the euro area’s economic outlook, current monetary policy, and the instruments available to safeguard financial stability.
Lagarde noted that the euro area economy grew modestly in Q3 2025, driven by domestic demand and a strong services sector, while manufacturing and exports were restrained by tariffs, global uncertainty, and a stronger euro. Inflation remains near the ECB’s 2% medium-term target, supported by moderated wage growth. The ECB maintains a data-dependent approach to interest rates, keeping key rates unchanged at the October meeting.
She emphasized the importance of effective monetary policy transmission across euro area countries and outlined three key instruments:
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Outright Monetary Transactions (OMTs) – to address severe distortions in government bond markets.
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Transmission Protection Instrument (TPI) – to counter disorderly dynamics in securities markets when financing conditions deteriorate unjustifiably.
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Pandemic Emergency Purchase Programme (PEPP) – launched during COVID-19 to stabilize markets and support economic recovery; fully recalibrated by December 2024.
Lagarde highlighted that these tools are adaptable to unprecedented challenges while remaining within the ECB’s mandate. She stressed that ongoing dialogue with the European Parliament ensures transparency and accountability.
In conclusion, she underscored the need for complementary policies to strengthen Europe’s economic resilience, including capital market integration and supervision, which are essential to reduce fragmentation, foster innovation, and maximize the Single Market’s potential.
Source: ECB, Speech by Christine Lagarde, Brussels, 3 December 2025.
