(Reuters) -European Central Bank (ECB) President Christine Lagarde said the euro zone was getting “very close” to reaching the central bank’s medium-term inflation goal, according to an interview published by the Financial Times on Monday.
Earlier in December, Lagarde had said the central bank would cut interest rates further if inflation continued to ease towards its 2% target, as curbing growth was no longer necessary.
“We’re getting very close to that stage when we can declare that we have sustainably brought inflation to our medium-term 2%,” Lagarde told the FT, urging continued vigilance on services inflation.
“You know, inflation, the latest reading we have is 2.2%,” she added. “But services is still 3.9% and not budging much. It’s been hovering around 4%. Slightly declining now.”
Lagarde said she opposed retaliation by Europe to tariff threats made by incoming U.S. President Donald Trump.
“I said that retaliation was a bad approach because I think that overall trade restrictions followed by retaliation and this tit-for-tat, conflictual way of dealing with trade is just bad for the global economy at large,” she added.
Like Lagarde, Irish central bank chief Gabriel Makhlouf too warned that some elements of services inflation in the euro zone were a bit concerning, the paper said.
Uncertainty clouded the outlook for 2025, however, as Trump’s actions were all but impossible to read, Makhlouf, a member of the ECB’s governing council, said separately.
Makhlouf would still want gradual interest rate cuts, rather than big leaps, unless the facts and evidence changed, he said.
“I have not seen, and I, at the moment, do not see, the need for a sudden big leap,” he said, referring to calls for the central bank to start cutting rates by 50 basis points.
“We wouldn’t want to complicate our price stability objective by making these sort of insurance cuts.”
