Inflation target at 2 percent, and stable: 2025 the pivotal year for the ECB

Brussels – 2025 marked a turning point in the fight against inflation and its high — excessively high– levels and far from the 2 percent reference target. For the European Central Bank and its president, Christine Lagarde, what lies ahead must be the time for a return to normality. In her New Year greetings message, the Eurotower’s number reflects on the events in 2024 and outlines expectations for the next 12 months.

“2024 was the year in which we made significant progress in reducing inflation, and hopefully 2025 is the year in which we will reach the target” of 2 percent, Lagarde said. In this way, she defends the actions of the ECB under her leadership, with an initial tightening of interest rates followed by an easing measures with cuts, the latest of which in December.

While the most challenging part is over, much still needs to be done. It is true that the situation so far has improved, and even in unsuspecting times, the central bank saw inflation normalizing in 2025. This year, the ECB “will continue in our efforts to ensure that inflation stabilizes at 2 percent.” It is the next step in the ECB’s monetary policy, which fulfills the institution’s mandate of ensuring price stability.

Without going into detail, Lagarde said she was ready to “revise our monetary policy” so we can “respond better to a changing world.” On the one hand, it means possible new interest rate cuts should inflation remain at the expected and desired levels and, on the other, measures to respond to potential shocks.

The ECB president anticipates it will not be an easy year, acknowledging that the agenda is “broad.” Uncertainties remain related to geopolitical tensions, the possible choices of the incoming US administration, and the energy issue, as Ukraine announced that it will not renew its Russian gas transit contract.