ECB nears inflation target, eyes gradual rate cuts – Lagarde

European Central Bank (ECB) President Christine Lagarde stated that the eurozone is “very close” to achieving the central bank’s 2 per cent medium-term inflation target, according to an interview with the Financial Times. Inflation in the eurozone was last recorded at 2.2 per cent, though services inflation remains elevated at 3.9 per cent.

Lagarde emphasised vigilance on services inflation and reiterated that interest rates could be cut further if inflation continues to ease. “We’re getting very close to declaring that we have sustainably brought inflation to our 2 per cent target,” she said.

Irish central bank chief and ECB governing council member Gabriel Makhlouf echoed Lagarde’s concerns over services inflation but advocated for gradual interest rate cuts rather than sharp reductions. “I don’t see the need for a sudden big leap,” Makhlouf said, emphasising the importance of maintaining the ECB’s price stability objective.

Uncertainty surrounding global trade policies, particularly those of incoming US President Donald Trump, also loomed large. Lagarde opposed retaliatory trade measures, warning against the risks of escalating trade conflicts for the global economy.

Attribution: Reuters

Subediting: M. S. Salama