The European Central Bank (ECB) needs to see more robust evidence that inflation is steadily moving towards the 2 percent target before contemplating additional interest rate cuts, ECB President Christine Lagarde stated.
In an interview with Portuguese TV station RTP, Lagarde stressed the importance of vigilance amid ongoing disinflation in the eurozone. She pointed to the increase in services prices, largely fueled by substantial wage gains, as a particular area of concern.
“We have to remain vigilant and we have to be confident that inflation is continuously down and that the data that we receive on wages, on profit, on activity, reinforce our confidence that we are on a path to win the fight,” Lagarde said.
Following an initial reduction in borrowing costs last month, ECB officials are proceeding cautiously. While some support the idea of one or two additional cuts this year, no immediate action is expected at the next meeting on July 17-18.
Although inflation showed a slight decline last month, worries persist about rapid wage growth and geopolitical uncertainties. Speaking at the ECB’s annual retreat in Sintra, Portugal, Lagarde highlighted the need for more time to address these lingering uncertainties affecting consumer price trends.
Members of the Governing Council have indicated that rate adjustments should be based on comprehensive data, often gathered during the quarterly meetings that feature updated economic forecasts. Lagarde appeared to endorse this method.
“We need a lot of data – I’m not sure that we are getting those data at every single monetary-policy Governing Council meeting that we have,” she remarked. “In theory, however, it could happen at any of our meetings. But on the basis of a strong set of data.”
As the ECB continues to balance promoting economic growth with controlling inflation, the focus remains on forthcoming data and the Council’s subsequent actions.
