ECB’s Lagarde: Baseline Disinflation Scenario Unequivocal, Despite Bumpiness

2 July 2024

By Isabel Teles – SINTRA, Portugal (Econostream) – European Central Bank President Christine Lagarde on Tuesday said that the latest euro area inflation figures showed that disinflation in the region would be bumpy, but that the 2% target would be met in 2025.

In a panel during the ECB Forum on Central Banking, Lagarde observed that June flash inflation, released earlier today, had been lower than inflation in May. 'So, that’s good, but we still believe that it’s likely to be a bumpy road until the end of 2024', she said. 'But we still have the target at the second half of 2025 on the basis of our projections and the baseline is unequivocal on that front.’

The disinflationary path was progressing, she said, and there were signs of a recovery, though this was still subject to uncertainties.

‘[W]e are very advanced on the disinflationary path and we are in that sort of slow recovery, which came about during the first quarter and which we hope will persevere.’

The ECB would continue to look at the data to better understand the persistence of services inflation, she said.

‘Obviously, we don’t need to have services at 2%... but we have to look at what is behind it’, she said, citing labour market components.

‘[When announcing the 6 June rate cut] I also said that it was not a linear process, that it was not a predetermined path that we were embarking upon, but a step that would be followed by further review of data, further understanding of where our three legs reaction function would be', she said.