Finance: ECB President wants to keep her foot on the brakes on key interest rates

After the latest interest rate cut, the President of the European Central Bank (ECB), Christine Lagarde, made it clear that further rapid interest rate cuts are not to be expected. Inflation in the euro area is “currently well on track to reach the two percent mark towards the end of next year,” says a post by Lagarde that the ECB published on the Internet and in several European media on Saturday. “We have made great progress, but our fight against inflation is not over yet.”

“However, it will take some time before inflation is completely banished from the economy. Until then, not everything will go smoothly. Vigilance, commitment and perseverance will be required along the way,” 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, although not quite as firmly as before,” Lagarde explained.

Key interest rates reduced by 0.25 percentage points

“Our future monetary policy decisions will depend on whether we can continue to observe that inflation returns to our target in a timely manner, 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 further release the brakes,” explained the central bank chief.

The ECB cut its key interest rates by 0.25 percentage points on Thursday. It was the first interest rate cut after a steep rise in interest rates to combat inflation from July 2022. Interest rates remained at a record high for almost nine months.

The deposit interest rate that banks receive for parked funds is now 3.75 percent. The interest rate at which credit institutions can obtain money from the central bank is 4.25 percent after the reduction.