External Risks Remain

Market participants widely believe that the European Central Bank has now entered a period of policy watch. Since the deposit facility rate was cut eight consecutive times from 4% to 2% last year, the monetary policy stance has shifted from tightening to neutral. Following the latest interest rate decision, traders estimate the probability of another rate cut this year to be less than one-third, with rates likely to remain stable next year.

However, internal views are not entirely consistent. Lithuanian Central Bank Governor Gediminas Šimkus hinted that if the euro continues to strengthen or external uncertainties intensify, a rate cut in December cannot be ruled out. Meanwhile, ECB Executive Board member Isabel Schnabel emphasized that, considering trade tariffs and increased fiscal spending, inflation may face upside risks in the coming years.

The external environment also poses challenges. The Federal Reserve is expected to initiate a new round of rate cuts next week, and if it signals a more aggressive easing stance, it could reignite the euro's appreciation momentum. Additionally, the latest U.S. tariff policies and immigration restrictions may increase uncertainties in the European economy through trade and investment channels. Lagarde stated that the recent tariff adjustment agreement between the U.S. and Europe has alleviated short-term uncertainties to some extent, but the long-term impact仍需時間驗證.

At the same time, the French government collapsed this week due to a budget reform crisis, marking the fifth prime minister change in two years. Markets are concerned that political uncertainty may weaken the eurozone's recovery momentum. Lagarde did not comment on this during the press conference.

Latest projections indicate that the eurozone economy is expected to gradually recover. The growth forecast for 2025 has been revised upward to 1.2%, higher than the previous 0.9%, reflecting improved business activity and consumer confidence. The growth forecast for 2026 has been slightly下调至1.0%, while the forecast for 2027 remains at 1.3%. Recent data show that business activity in the eurozone continued to expand in August, with German business confidence rising to its highest level since 2022, highlighting the economy's resilience amid trade frictions and geopolitical shocks.