By Sudip Kar-Gupta
PARIS (Reuters) – European Central Bank (ECB) President Christine Lagarde said on Thursday that the ‘hardest and worst bit’ regarding inflation was likely over and that interest rates would be cut if the ECB had certainty that inflation had fallen to the 2% level.
“I think the hardest part is behind us,” said Lagarde, regarding the battle against inflation, adding she also thought interest rates had reached their highest level.
“I think that rates, barring any further shocks or unexpected data, will not continue to go up. And if we win our fight against inflation, and if we are certain that inflation will indeed be at 2%, at that point rates will start to go down,” said Lagarde, who was speaking on France 2 TV.
Asked if 2024 would be the year when rates would go down, Lagarde replied: “As President of the European Central Bank, I cannot give you a date.”
The ECB sees inflation oscillating in the 2.5% to 3% range for much of this year and policymakers have said any talk of a rate cut before crucial first-quarter wage data due in May would be premature.
Investors have priced in at least five rate cuts in 2024 with the first move coming in March or April – a timeline several ECB policymakers have called excessive given lingering price pressures.
Inflation in the euro zone rose to 2.9% in December from 2.4% in November – Lagarde said she saw euro zone inflation going down to 1.9% in 2025.
Lagarde played down concerns that transport problems at the Suez and Panama canals could eventually result in higher prices, telling France 2 TV that those situations were ‘more or less under control’.
Lagarde added that she would view a re-election of Donald Trump as United States President as a ‘threat’ for Europe.
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