European Central Bank governor declares disinflation process on track

(MENAFN) European Central Bank (ECB) Governor Christine Lagarde addressed recent developments in inflation at the IMF Annual Meeting in Washington on Friday, stating that the disinflation process is "well on track," as evidenced by the latest inflation data. She pointed out that while global growth is expected to continue expanding at a moderate pace, the risks associated with this outlook have shifted to the downside. Lagarde attributed this shift to increasing economic policy uncertainty amid heightened geopolitical tensions, which could affect economic stability.

Lagarde noted a positive trend in global headline inflation, which is declining primarily due to lower energy prices, improved supply conditions, and the continuation of tight monetary policies. In light of these factors, the ECB made a strategic decision to lower its policy interest rates by 25 basis points earlier this month. This reduction in the deposit facility rate, which is the mechanism through which the ECB guides its monetary policy stance, reflects the Governing Council’s revised assessment of both the inflation outlook and the dynamics influencing underlying inflation, as well as the effectiveness of monetary policy transmission in the current economic climate.

Despite the easing of rates, Lagarde emphasized that the ECB’s Governing Council remains committed to maintaining sufficiently restrictive policy rates for as long as necessary to achieve its medium-term inflation target of 2 percent. This commitment indicates a cautious approach, as the central bank balances the need to support economic growth while also addressing inflation concerns.

In September, the annual inflation rate in the euro area registered at 1.8 percent, which was slightly below market expectations of 1.9 percent. This minor shortfall reflects ongoing challenges in achieving desired inflation levels, underscoring the complexities the ECB faces as it navigates monetary policy in an evolving economic landscape.

MENAFN28102024000045015839ID1108824487