ECB’s Lagarde says interest rates are at correct level
Most officials have signalled they do not see a need to adjust borrowing costs when they meet in December
[FRANKFURT] The European Central Bank (ECB) is well positioned with borrowing costs currently at the right level, according to President Christine Lagarde.
“The interest rates we settled on at the last meetings are, in my view, set correctly,” Lagarde told Slovak TV station JOJ24 in comments broadcast on Friday (Nov 28). “I keep saying that we are in a good position given the inflation cycle, which we’ve managed to get under control.”
Discussing dangers to the inflation outlook, she said that the scope of risks has narrowed, but that upward pressure on prices could re-emerge if the US were to increase tariffs or supply chains were disrupted.
The remarks underscore the ECB’s satisfaction with recent developments, as consumer-price gains hover around the 2 per cent target and the economy holds up better than expected to US tariffs. Most officials have signalled they do not see a need to adjust borrowing costs when they meet in December.
Fresh quarterly forecast could still prompt a discussion if they show inflation undershooting the goal. An account of October’s meeting showed some worrying about such a scenario, though policy settings were seen as “sufficiently robust for managing shocks.”
ECB Vice-President Luis de Guindos said this week he only sees a “limited” risk of price growth turning out too weak, calling the current rate level of 2 per cent “the correct one.” chief economist Philip Lane highlighted that slowing wage growth should help rein in non-energy costs that are still growing more quickly than desired.
Turning to the economy, Lagarde said that euro-area expansion has been more resilient than anticipated, even with the world in a phase of transformation.
“The situation has exceeded our expectations,” she said. “At the start of 2025, we expect growth of 0.9 per cent, rising to 1.2 per cent by September, and I wouldn’t be surprised if the growth rate ends up even higher by the end of the year.”
On Germany’s recent struggles and the political tensions in France over the budget, Lagarde expressed hope.
“I’m unequivocally optimistic – that’s just my nature,” she said. “In a world undergoing transformation, it’s necessary to act quickly, stay perceptive, but also remain optimistic. So, I always see the glass as half full rather than half empty.” BLOOMBERG
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