Lagarde: “Inflation back at 2 per cent by mid-2025, earlier than expected”

Brussels – Good news for the eurozone: Inflation is falling and, if things stay as they are, should “return to 2 per cent earlier in our projection horizon than before, in mid-2025”, the president of the European Central Bank, Christine Lagarde, said today (20 March) speaking at at the XXIV European Central Bank Conference organized by the Institute for Monetary and Financial Stability, Goethe University .

Of course, reasons for uncertainty are stille there, such as geopolitical tensions, crisis in the Middle East and risks of new energy price hikes. Therefore, added Lagarde, only “the coming months will help us get an even clearer picture”. So far, however, expectations are positive.

“Inflation is falling steadily, and there are reasons to believe that the projected disinflationary path will continue,” Lagarde stressed. ECB estimates now see projections of average inflation at 2.3 per cent in 2024, “which is 0.4 points lower than in December and 0.9 points lower than in September,” Lagarde pointed out. “Therefore, we expect inflation to fall to 2 per cent in 2025 and to 1.9 per cent in 2026″.

A return to the reference target is also due to the decisive action of the ECB, which Lagarde once again vindicated. “The transmission of our monetary policy is taking place in the right direction,” she said talking about the decision to raise interest rates and, after that, keep them at same level. “Financing conditions have reacted strongly to the higher rates, demand for loans has weakened, and, in turn, activity has slowed particularly in the sectors most sensitive to the interests of the economy”.

The ECB President confirmed then her intentions of  waiting until June-July before considering a possible interest rate cut. “By June, we will have a new set of projections that will confirm whether the path of inflation that we projected in our March forecast remains valid.” The expected information will be used to take decisions.