The President of the European Central Bank (ECB), Christine Lagarde, has told RTÉ that there is a ‘strong likelihood’ of an ECB interest rate cut in the coming weeks “if the data that we receive reinforces the confidence level that we have.”
The ECB governing council will meet to decide conclusively on any reduction in just over two weeks’ time. In an interview with Prime Time, Ms Lagarde was asked if people should expect to see a rate cut announced.
“No predicament, no prescription, no commitment,” she told presenter, Miriam O’Callaghan, “but it is a case that if the data that we receive reinforces the confidence level that we have – that we will deliver 2% inflation in the medium term, which is our objective, our mission, our duty – then there is a strong likelihood.”
When the ECB lowers its rates, borrowing money becomes less expensive for banks, leading typically in the medium-term to lower mortgage rates and borrowing costs for bank customers across the eurozone.
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Ms Lagarde and more than 20 members of the ECB governing council are in Ireland for a two-day retreat in Kilkenny, where the ECB’s wider monetary policy is expected to be discussed in private.
In recent years, the ECB’s central aim has been to tame inflation, which peaked above 10% in the months after the 2022 full-scale Russian invasion of Ukraine but has since fallen to around 2.4%.
In the medium term, the stated aim is to keep inflation close to, but below, 2% across the bloc.
“I’m really confident that we have inflation under control,” Ms Lagarde said.
“Why is that? Because some of the factors that had a big impact are fading away. I’m thinking about the energy crisis. I’m thinking about the- what we call the supply chain bottlenecks, that is gradually moving away.”
“The forecast that we have for next year and the year after that is really getting very, very close to target, if not at target. So, I am confident that we’ve gone to a control phase,” she said.
Presenter Miriam O’Callaghan also asked Ms Lagarde about the forthcoming US election.
“You’ve been very open and spoken out in the past about your concerns about Donald Trump. There is a possibility he will become president of the United States again. Is that of concern to you?” Ms O’Callaghan asked.
Ms Lagarde responded saying: “It’s a matter for the American voters to decide, and I’m sure that they will make their decisions fully informed. What I know for a fact is that – given the programme that is being advertised during the campaign – is that it will have consequences for Europe for which we should prepare ourselves, whether it’s through tariffs or through other ways and means.”
“We just have to get ready, because we are strong, we are a big economic zone, and we shouldn’t be followers, we should be leaders,” she added.
Asked about her future in the ECB, Ms Lagarde would not be drawn but, referring to the rate of inflation, she said her aim is “2%, 2%, 2% inflation down. Mission accomplished. That’s what I want to do. And then I’ll think about life.”
She said climate change is among the other concerns to be considered at the retreat.
“We have to think medium-term when we set our inflation target and aim our monetary policy decisions, but we have to look at what’s coming at us,” Ms Lagarde said.
“But we also have to think, you know, down the road, what will climate change, how it will affect our lives and the lives of our children and grandchildren. What can we do about it today? This is a big challenge,” she said.
