European Central Bank President Christine Lagarde told CNBC on Wednesday that the European Central Bank is “not too worried” about the impact of foreign inflation on the euro zone.
When asked about the potential impact on Europe if U.S. inflation picks up again, Lagarde said: “If U.S. inflation picks up again, it will definitely become a problem for the United States. That is the first consequence. “
“We’re not too worried about inflation exporting to Europe.”
“We will observe some interesting phenomena. For example, the exchange rate will be of interest and … there may be consequences, but we are certainly interested in seeing the growth of the United States because the growth of the United States has been This is a plus for the rest of the world,” she added.
The ECB president stressed that policymakers are confident that inflation will reach the central bank’s 2% target by 2025 and that the deflation process will continue. Eurozone annual inflation rate Growth in December was 2.4%It was the third straight month of gains after hitting a low of 1.7% in September.
Lagarde also said that “the market expects that the United States and the euro zone will take very different monetary policy measures in the coming months” because the European Central Bank and the Federal Reserve “are not cutting interest rates at the same pace.”
“We do have this disagreement, and it has to do with the different economic environments in the United States and Europe right now,” she noted.
The European Central Bank cut interest rates four times last year, taking the deposit rate, its key rate, to 3%. The market currently expects a further rate cut to 2% by September 2025.
In their latest macroeconomic forecasts in December, ECB staff said they expected annual inflation in the euro zone to average 2.1% this year, adding that progress on deflation was “progressing well”.
At this time, the European Union is grappling with the problem of sluggish growth, with economic growth in Germany, its largest economy, also recording sluggish growth.
second straightannual GDP contraction 2024.
gradual path
“In terms of growth, the risks are to the downside and we have to pay very close attention to the data that we are receiving, collecting and analyzing to understand what needs to be done,” she said of the outlook for the euro zone.
“We’re on this regular, gradual path. Deflation is happening.”
The central bank will pay close attention to so-called “latecomer” factors such as services, energy, wages and insurance to see whether service prices can achieve its expected gradual decline in early 2025.
Although overall price growth in the euro area has fallen from a peak of 10.6%, service sector inflation is particularly troublesome, hovering near 4% since November 2023.
This is a breaking news story and will be updated soon.
