① Lagarde stated that the bank has a clear direction on the cost of borrowing, but the pace of reduction is still to be determined, and she does not rule out taking more significant measures;
② Lagarde said, "The direction is clear, and the pace of rate cuts will be determined based on review and outlook factors, using three criteria and exercising judgment."
European Central Bank President Christine Lagarde has indicated that the bank has a clear direction on the cost of borrowing, but the speed of reduction is still to be determined, and she does not rule out taking more significant measures.
This week, finance ministers and central bank governors gathered in Washington for the annual meetings of the International Monetary Fund (IMF) and the World Bank. Speaking to the media during the conference, Lagarde said that the process of disinflation is on the right track, and she described recent data as "relatively reassuring."
"I believe the direction is clear, and the approach we have taken since June is wise, and we should continue with this cautious approach."Last week, the European Central Bank (ECB) cut its key interest rates for the third time this year, lowering all three rates by 25 basis points. The main refinancing operations rate, the marginal lending facility rate, and the deposit facility rate were adjusted to 3.4%, 3.65%, and 3.25%, respectively.
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"Throughout the week, there will be people saying, oh, it should be 50 (basis points), it should be 25 (basis points)," Lagarde said, "The direction of travel is clear, and the pace of rate cuts will be determined based on a review and outlook, using three criteria and exercising judgment."
Previously, the European Union's statistical office revised the September eurozone CPI annual rate down from 1.8% to 1.7%, marking the first time since 2021 that eurozone inflation has fallen below 2%. Villeroy, a member of the ECB's Governing Council and Governor of the Banque de France, stated that the stable 2% inflation target could be achieved as early as the beginning of next year.
Austrian central bank Governor Holzmann mentioned in another event that if the pace of price declines is faster than expected, it would allow the ECB to cut rates again soon. Portuguese central bank Governor Centeno also said that if there is data to support it, officials will be prepared to consider increasing the degree of monetary easing.
Although officials did not provide too many specific indications about the future path of interest rates, investors are betting that the ECB will cut rates by 25 basis points at each of the next four meetings, bringing the deposit rate down to 2% by mid-2025.Despite Lagarde's optimistic outlook, she still uttered some cautious words, "We all believe that 2025 is the year we achieve our goals on a sustainable basis. But we must stay focused on everything."
"Our energy prices are relatively low at present. Our service industry prices have slightly decreased, but not significantly. The last reading showed that we are still at 3.9%, and we must pay attention to local inflation."
Lagarde also stated that in Europe, the long-awaited increase in consumer spending is still expected to materialize, but it will take longer than anticipated, "The timeline is stretching, and European consumers are definitely not as strong as American consumers overall."