Monetary policy: Lagarde wants to “keep her foot on the brake for a while”

Monetary policy: Lagarde wants to “keep her foot on the brake for a while”

For the first time in a long time, the European Central Bank recently announced a reduction in its key interest rate. However, according to the ECB president, further interest rate cuts may not be forthcoming for the time being.

Following the latest cut in key interest rates, the President of the European Central Bank, Christine Lagarde, is dampening expectations of further rapid interest rate cuts. Inflation in the eurozone is “currently well on track to reach the two percent mark towards the end of next year,” says a guest article by Lagarde for the “Rheinische Post”. “However, it will still take quite a while before inflation is completely banished from the economy. Not everything will go smoothly until then. Vigilance, commitment and perseverance will be required on this path,” writes the ECB President.

“For this reason, interest rates must remain restrictive for as long as necessary to ensure price stability in the long term. In other words, we must keep our foot on the brake for a while longer, albeit not quite as firmly as before,” Lagarde explained. “The decisive factors for our future monetary policy decisions will be whether we can continue to observe that inflation returns to our target in the near future, that price pressures in the economy as a whole are easing and that our monetary policy continues to work effectively against inflation. These factors will dictate when it is time to release the brake further,” wrote the central bank chief.

The ECB cut its key interest rates by 0.25 percentage points on Thursday. It was the first rate cut after a steep rise in interest rates to combat inflation.

Source: Stern

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