Lagarde: ECB will continue to cut interest rates

European Central Bank President Christine Lagarde said Monday that eurozone policymakers will cut interest rates further if inflation continues to fall and is on track to meet the ECB’s 2% target.

“If incoming data continues to confirm our baseline, the trend is clear and we expect further rate cuts,” Lagarde said in a speech at the Bank of Lithuania, according to CNN.

The ECB cut interest rates again last week as inflation appeared to be under control and the eurozone economy showed signs of weakness.

The quarter-point move was the Frankfurt-based central bank’s third straight cut and its fourth since June.

The easing cycle has taken the ECB’s key deposit rate down to 3 percent from an all-time high of 4 percent.

Lagarde said the central bank’s stance remains “constrained,” meaning it will act as a brake on business activity in the eurozone, the ECB’s main lever for curbing inflation.

However, the central bank has eased its monetary policy and messaging as consumer price pressures have dissipated.

“Although we are not there yet, we are getting closer to achieving our target” of 2% inflation, Lagarde said.

Eurozone inflation was 2.3% in November, after hitting double-digit highs in late 2022.

In new economic forecasts published last week, the ECB said it expects inflation to fall to 2.1% in 2025 and 1.9% in 2026.

Lagarde said there was now a greater risk that inflation could fall further due to “weaker-than-expected growth prospects” and “geopolitical events.”

She added that if the United States were to adopt a protectionist trade policy under President-elect Donald Trump, eurozone growth would likely be hit.

At the same time, she said, “rising geopolitical tensions could lead to higher energy prices and shipping costs in the near term.”