Recent developments on prices in the euro zone “reinforce our confidence that inflation will return to target in due time,” declared the President of the ECB.
The President of the European Central Bank Christine Lagarde expressed confidence on Monday that inflation would soon return to 2%, suggesting that a further rate cut could take place in October.
Recent developments on prices in the euro zone “reinforce our confidence that inflation will return to target in due time,” Lagarde said during a hearing at the European Parliament.
“We will take this into account during our next monetary policy meeting in October,” which is crucial for setting the level of interest rates, added the central banker.
To date, the ECB forecasts a return of inflation in the euro zone to 2% by the end of 2025, but Ms. Lagarde’s statements on Monday suggest that this could happen more quickly. Enough to reinforce the expectations of observers, already numerous, who now consider a further reduction in rates likely when the guardians of the euro meet on October 17.
This would be the third decline after that of June, which occurred for the first time in 5 years, and that of September.
A month ago, experts were instead counting on the next monetary easing in December, during the last meeting of the year.
In September, the disinflationary trend accelerated in Germany (1.6%) as well as in France (1.2%), Italy (0.7%) and Spain (1.5%), still in annual variation.
While the figure for the euro zone will be known on Tuesday, analysts surveyed by Factset expect a drop to 1.8%, after 2.2% in August.
“It is likely” that the inflation figure in September “is close to 2%” and that this is thus “below the base scenario” of the ECB, included in its economic projections which determine its monetary course, according to Ms. Lagarde.
This indicates that “the fight against inflation is progressing and that the process of disinflation is underway”, she commented, even if inflation is likely to “temporarily increase again in the fourth quarter” of this year because previous sharp falls in energy prices will no longer be reflected in annual rates, she warned.
