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ECB Inflation Goal in Sight, But Fight Not Over, Lagarde Says

Christine Lagarde, president of the European Central Bank (ECB), during the annual meetings of the IMF and World Bank in Washington, DC, US, on Tuesday, Oct. 22, 2024. The International Monetary Fund lowered its global growth forecast for next year and warned of accelerating risks from wars to trade protectionism, even as it credited central banks for taming inflation without sending nations into recession. Photographer: Ting Shen/Bloomberg (Ting Shen/Bloomberg)

(Bloomberg) -- Euro-area consumer-price growth is headed toward the European Central Bank’s 2% goal, but the fight hasn’t yet been won, according to President Christine Lagarde.

“The objective is in sight, but I am not going to tell you that inflation is under control,” she said in an interview with Le Monde published Thursday. “We also know that inflation will rise in the coming months, simply because of base effects.”

Sticking with the ECB’s standard line, Lagarde said that “the size and sequence of interest rate cuts will be determined by economic data in the coming weeks and months.”

The comments come ahead of inflation data that will probably show an acceleration in October on the back of volatile energy costs. Price growth in Germany already came in stronger than expected on Wednesday, and it may continue to accelerate in the remainder of the year. 

Some ECB officials have recently emphasized growing concerns about the euro-area economy, though third-quarter numbers this week revealed that growth, at 0.4%, was faster than predicted. That contributed to investors paring bets on a bigger rate cut in December, which some policymakers have said should be on the table to avoid falling behind the curve.

But others have pushed back against the idea. Executive Board member Isabel Schnabel said Wednesday that a gradual approach to cutting rates remains appropriate, while Bundesbank President Joachim Nagel said the central bank mustn’t rush further steps. 

“I want to see that 2% target achieved in a sustainable way,” Lagarde said. “Absent a major shock, that will be sometime in 2025.”

She also reiterated the ECB’s expectation for a consumption-led recovery, saying that “we are convinced — and economic history shows us — that additional disposable income will ultimately be allocated to consumption.”

“Based on the information and analysis we currently have, we do not expect a recession in 2024, 2025 or 2026,” she said. 

©2024 Bloomberg L.P.