ECB, Lagarde: “Fight Against Inflation Is Not Over”

The President of the European Central Bank spoke during a meeting in Sintra, Portugal

The European Central Bank (ECB) Forum on the central banking system is taking place in Sintra, Portugal, from July 1 to 3, bringing together governors of various institutions, as well as scientists and representatives of the financial world.

The theme of the conference is “Monetary Policy in an Era of Transformation,” and ECB President Christine Lagarde hosted the event and, in her speech, cooled the enthusiasm of those who expected loose monetary policy in the near future, while still expressing caution about the inflation trend.

“Much of the policy challenge in recent years has been to stabilize inflation and underlying uncertainty in the economy. However, we have been able to chart a path through this uncertainty and go a long way in fighting inflation,” she explained. “Inflation peaked at 10.6% in October 2022. In September 2023, when we last raised the rate, it more than halved to 5.2%. And then, after nine months of holding rates, we saw inflation halve again to 2.6%, which in June led us to cut rates for the first time.”

But “our work is not yet done,” and “we must be vigilant” with the main goal always remaining to achieve the 2% inflation rate, which the institute estimates will not be reached until the end of 2025. Lagarde also explained how decisions taken to curb inflation have slowed economic growth: “Interest rates have risen steadily and remained high while the economy has stagnated for five consecutive quarters.”

Inflation peaked higher than in the past, but also declined at a faster pace, and labor market indicators were exceptionally positive. “Employment has grown despite slowing GDP growth, rising by 2.6 million since the end of 2022. The unemployment rate is at historic lows for the eurozone and well above the European average.”