ECB: Lagarde Ready to Cut Rate “If There Are No New Shocks”

“Having avoided a new economic shock, we have reached peak rates, but we will have to maintain restrictive measures until we achieve certainty.”

Christine Lagarde, in an interview with Bloomberg TV on the occasion of the World Economic Forum held in Davos, Switzerland, spoke about the economic situation in the European Union. The restrictive policy made it possible to choose the “right path,” explained the President of the European Central Bank (ECB), i.e., the path that curbs inflation. Over the course of two years, it puts European businesses and households to the test. These measures should return the rate of price growth to the considered “normal” level of 2%.

A fall in rates is “also possible,” Lagarde said, but “until we make sure that it is moving towards 2% and that this is supported by facts, we cannot celebrate victory.” She continued, “I have to be cautious because we are still dependent on indicators. Uncertainty remains as some indicators have not consolidated at the level we would like.”

The decisive moment in this sense will be next spring, when the ECB will have a clearer picture of household incomes and therefore expected inflation. In general, it was said at the Davos Forum, the situation in the Middle East and the crisis in the Red Sea, in particular, which leads to the redirection of a significant part of maritime commercial traffic towards the Cape of Good Hope, raises concern. This increases transport and insurance costs. Initially this affected cruise ships and container ships, and in recent days has spread to tankers and gas carriers. If the situation is not resolved, it could result in a “new economic shock.”