European Central Bank: ECB President dampens expectations of further interest rate cuts

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European Central Bank
ECB President dampens expectations of further interest rate cuts

ECB President Christine Lagarde is dampening expectations of further interest rate cuts for the time being. Photo

© Frank Rumpenhorst/dpa

Last week, the ECB made the first interest rate cut since the strong wave of inflation in the currency area. According to ECB President Lagarde, it will remain that way for the time being.

The President of the European Central Bank (ECB) President Christine Lagarde has defended the latest interest rate cut against criticism and dampened expectations of further interest rate hikes. The central bank continues to assume that the medium-term inflation target of two percent can be achieved next year, said Lagarde in a joint interview with the “Handelsblatt” and other European business newspapers. Against the backdrop of the recent rise in inflation in the common currency area, the central banker also made it clear: “We do not yet declare the battle won.”

Last week, the ECB made the first interest rate cut since the strong wave of inflation in the currency area, lowering key interest rates by 0.25 percentage points despite accelerated wage growth. ECB President Lagarde admitted that there were “some current figures that could have been better.” Nevertheless, she defended the interest rate cut as appropriate.

However, this does not mean “that interest rates are now moving linearly downwards.” Rather, Lagarde prepared the financial markets for an interest rate turnaround with interruptions: “There could also be phases in which we leave interest rates unchanged.”

According to Lagarde, the growth prospects for the eurozone have improved. She pointed to recent economic data, improved sentiment indicators and the continued robust labor market in the eurozone. She therefore assumes “that the economy will pick up speed again,” said the ECB President.

dpa

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