(Updated with details)
The European Central Bank (ECB) is increasingly convinced that inflation will return to its 2% target, which should be reflected in its October decision, the institution’s president, Christine Lagarde, said on Monday.
The ECB already lowered its interest rates in June and September, but Christine Lagarde then gave little indication of the central bank’s next decision, leaving the markets waiting.
His comments reinforce already widespread bets that borrowing costs will fall further in October, given the rapidly deteriorating growth outlook and falling energy prices.
“The latest developments reinforce our confidence that inflation will return to its target in due time,” she told the European Parliament’s Economic and Monetary Affairs Committee.
“We will take this into account at our next monetary policy meeting in October,” she added.
Analysts expect inflation in countries sharing the euro to fall below the ECB’s 2% target in September for the first time since mid-2021, an outlook reinforced by a series of national data published in recent days.
These expectations, combined with lackluster growth indicators, reinforce bets on a 25 basis point rate cut in October.
“Looking ahead, the low level of certain survey indicators suggests that the recovery faces headwinds,” Christine Lagarde said.
She added that the labor market, causing some price pressures due to rapid wage growth, remains resilient, even as the rise moderates and corporate profits absorb some of the wage increases. .
(Report by Balazs Koranyi, French version Diana Mandiá, edited by Kate Entringer)
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