ECB president hints at possible interest rate cuts next month

Christine Lagarde, President of the European Central Bank (ECB), recently hinted at a possible rate cut next month should economic indicators continue to stabilize. Lagarde suggested a cut is likely with consumer price growth now largely under control, if upcoming figures match current ECB projections.

The announcement comes amid expectations that the ECB’s policy direction could change, following the recent containment of inflation spikes that had bedeviled the eurozone economy. The central bank’s board of governors is expected to meet in just over two weeks to decide on this possible move.

During her interview on Prime Time, Lagarde emphasized that the decision largely depends on the latest economic data. She maintained a cautious tone, indicating there are no firm commitments yet, but acknowledging the possibility of action if the data supports it.

The central bank’s decision to potentially cut rates follows a period of elevated inflation due to several global disruptions, including Russia’s invasion of Ukraine in 2022. However, with inflation close to the ECB’s 2% target, an interest rate cut could further stabilize and possibly stimulate the eurozone economy by making borrowing cheaper. Lagarde said this could boost spending and investment, supporting economic growth in member states.

The influence of the American elections

In addition to discussing interest rate cuts, Lagarde also answered questions about broader economic concerns, including the upcoming US election and its potential impact on Europe. While carefully respecting the electoral process, she shared her concerns about possible consequences for European economic policy depending on the election results.

The ECB president added that Europe must prepare for any economic challenges arising from new US policies. Lagarde also highlighted other pressing issues, such as climate change, and noted the importance of incorporating long-term environmental considerations into current monetary policy. She emphasized the need for strategic planning on how the ECB can lead rather than follow global economic trends.

Reduce inflation to 2%

During the discussion, Lagarde also reiterated her commitment to achieving and maintaining the ECB’s inflation target of 2%, describing this as her mission and duty. This focus, she said, is important not only for current economic stability, but also for building a foundation for future resilience.

The ECB President also provided insight into internal discussions during the ECB’s two-day retreat in Kilkenny, where more than twenty members of the Governing Council met to privately discuss these issues. These discussions are part of their broader strategy to address immediate economic challenges and future risks to ensure a balanced and proactive monetary policy approach.

At the end of the interview, Lagarde expressed her confidence in the future, hinting at her plans within the bank and her continued commitment to steering the eurozone towards sustainable economic stability.