European Central Bank President Christine Lagarde stated that the ECB is “not overly concerned” about inflation from abroad impacting the eurozone. She highlighted that any resurgence of inflation in the U.S. would primarily affect the U.S., though exchange rate shifts could have implications for Europe.
Lagarde expressed optimism about the euro zone’s inflation trajectory, reaffirming confidence that inflation would reach the ECB’s 2% target by 2025. December inflation stood at 2.4%, marking a steady increase after hitting a low of 1.7% in September.
Markets anticipate diverging monetary policies between the ECB and the Federal Reserve due to differing economic conditions. While the ECB cut rates four times last year, bringing its deposit rate to 3%, further reductions to 2% are expected by September 2025. By contrast, the Federal Reserve is projected to trim rates by less than half a percentage point over the same period.
Lagarde acknowledged risks to eurozone growth, particularly with Germany’s second consecutive GDP contraction in 2024. “Risk is to the downside when it comes to growth,” she said, emphasizing the need for close data monitoring.
The ECB continues to address persistent inflationary pressures in services, energy, and wages. Although headline inflation has dropped from a peak of 10.6%, services inflation remains stubbornly high at around 4% since late 2023.