European Central Bank (ECB) President Christine Lagarde said the EURO zone was getting "very close" to reaching its medium-term inflation goal. Lagarde disclosed earlier this month that the governing bank is willing to further cut interest rates, should inflation keep easing towards its 2% target.
Details of ECB’s Report
The announcement was part of Lagarde’s comments during an interview published by the Financial Times on Monday. “We’re getting very close to that stage when we can declare that we have sustainably brought inflation to our medium-term 2%,” said Lagarde, urging continued vigilance on services’ inflation.
"You know, inflation, the latest reading we have is 2.2%," she added. "But services is still 3.9% and not budging much. It’s been hovering around 4%. Slightly declining now."
The President said she had opposed retaliation by Europe to tariff threats made by incoming U.S. President Donald Trump. Rather than retaliate with their trade restrictions, Largade would advise the EU to consider more amicable methods of counter-balancing any tariff impositions by the Trump administration.
She remarked, "I said that retaliation was a bad approach because I think that overall trade restrictions followed by retaliation and this tit-for-tat, conflictual way of dealing with trade is just bad for the global economy at large."
Irish Central Bank Chief Backs Lagarde, Shares Opinion on Trump’s Policies
Meanwhile, Lagarde isn't alone in her concern over the hesitant service inflation digits. Irish central bank Chief Gabriel Makhlouf also warned that some elements of service inflation in the eurozone were a bit concerning. Makhlouf also believes that uncertainty clouded the region's outlook for 2025, due to the impossibility of predicting Trump's policies.
Per interest rate cuts, Makhlouf, who's a member of the ECB's governing council, prefers gradual interest rate cuts, rather than big leaps, unless the facts and evidence change.
While commenting on calls for the central bank to begin cutting rates by 50 basis points, Makhlouf remarks, "I have not seen, and I, at the moment, do not see, the need for a sudden big leap. We wouldn't want to complicate our price stability objective by making these sorts of insurance cuts."
The Bottom Line
Regardless of whatever happens as a result of the policies in Trump's incoming administration, the ECB has a remarkably fallen inflation rate to buffer shocking economic realities in the near future. While Lagarde's panel seeks more amicable ways of approaching international trade, especially with the US, we can at least appreciate the EU for clamping down on the ECB’s medium-term inflation goals.