ECB still has ‘long way to go’ to tame inflation: Lagarde

BERLIN: The European Central Bank (ECB) still has “a long way to go” to tame inflation, its president Christine Lagarde said Friday, a day after the body announced its first interest rate cut since 2019.

In an oped published Friday evening in several European newspapers, Lagarde said that inflation had “slowed significantly” and was expected to fall to the target level of two percent by next year.

“But there is still a long way to go until inflation is squeezed out of the economy. It will not be an entirely smooth ride,” she continued.

“Interest rates will therefore have to remain restrictive for as long as necessary to ensure price stability on a lasting basis. In other words, we still need to have our foot on the brake for a while, even if we are not pressing down as hard as before.”

The ECB on Thursday lowered the eurozone’s record high key deposit rate by a quarter of a point to 3.75 per cent after having kept borrowing costs on hold since October.

The cut is expected to provide a much-needed boost for the beleaguered eurozone economy.

However, the bank reiterated that it would “keep policy rates sufficiently restrictive for as long as necessary” to hit its inflation target, adding the rate-setting governing council “is not pre-committing to a particular rate path”.

“We have made major progress, but our fight against inflation is not over,” Lagarde said in her oped.

“As the guardian of the euro, we are committed to ensuring low and stable inflation for the benefit of all Europeans.”