ECB's Lagarde Confirms Progress on Inflation Goal, FT Reports

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European Central Bank (ECB) President Christine Lagarde stated that the eurozone is nearing its medium-term inflation target, according to an interview with the Financial Times published on Monday.

Lagarde noted that earlier in December, the central bank indicated it would reduce interest rates further if inflation continued its descent toward the 2% goal, as limiting economic growth was no longer necessary. “We’re getting very close to the point where we can say we have sustainably achieved our medium-term inflation target of 2%,” she said, while stressing the need for vigilance regarding services inflation.

She highlighted that the most recent inflation figure stands at 2.2%. However, she expressed concern about services inflation, which remains high at 3.9%, only slightly down from hovering around 4%.

Lagarde also voiced opposition to retaliatory measures in response to tariff threats by incoming U.S. President Donald Trump. "Retaliation is a poor approach," she said. "Trade restrictions followed by tit-for-tat actions harm the global economy."

Echoing Lagarde’s concerns, Gabriel Makhlouf, Governor of the Irish Central Bank and ECB Governing Council member, described certain aspects of services inflation in the eurozone as troubling.

Looking ahead to 2025, Makhlouf noted that uncertainty persists, particularly with the unpredictability of Trump’s policies. He advocated for gradual interest rate cuts rather than abrupt changes, unless the economic data warrants a shift. "I currently don’t see the need for a sudden, large cut," he said, addressing calls for 50 basis-point rate reductions. "We should avoid complicating our price stability objective by making such precautionary moves."

 

 

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author.