ECB’s Lagarde: Strong Confidence That Inflation Is Going Down Rather Than Up

24 January 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank President Christine Lagarde said on Friday that the ECB had faith in the disinflation process.

In a panel discussion at the World Economic Forum in Davos, Switzerland, Lagarde said that the ECB had ‘strong confidence that [inflation] is going down rather than up’.

With inflation at 2.4% in the euro area, interest rates at 3%, the aggregate deficit at 3% of GDP and debt-to-GDP ratio at around 80%, the current situation was a ‘big wake-up call’ and an ‘existential threat’ that should be confronted with clear action, she said.

Asked about why she described the situation as an existential threat, Lagarde said that ‘if you talk to the CEOs … they are not very upbeat right now.’

‘When you ask them why they are not, they are making reference to the price of energy’, she added. ‘Fair enough, but energy costs are going down.’

Asked if the EU had been unfair to the US in trade matters, as US President Donald Trump has suggested, Lagarde refused to give a ‘yes or no’ answer.

Trump's emphasis was on the surplus vs. deficit in the current account and in the trade balance, she said, but the focus should be elsewhere.

‘[Y]ou have to look very carefully under the hood, we have to look at the goods exchanges, you have to look at the services exchanges, at the capital account’, she said. ‘It cannot just be black and white.’

Negotiations should take place, according to Lagarde, and trade relationships should exist within an organised framework, with rules and institutions.