ECB's Lagarde Hints At Further Rate Cut As Inflation Moderates

FRANKFURT, Oct 1 (Bernama-dpa) -- European Central Bank (ECB) President Christine Lagarde suggested on Monday that inflation could soon reach the bank’s target level and left the door open for a potential further interest rate cut.

Speaking in Brussels, Lagarde emphasised the bank's commitment to achieving price stability as inflation shows signs of moderation across the Eurozone, reported German news agency dpa.

"Looking ahead, inflation might temporarily increase in the fourth quarter of this year as previous sharp falls in energy prices drop out of the annual rates, but the latest developments strengthen our confidence that inflation will return to target in a timely manner," Lagarde told a European Parliament's economic and monetary affairs committee.

"We will take that into account in our next monetary policy meeting in October. The ECB staff projections from September foresee inflation to average 2.5 per cent in 2024, 2.2 per cent in 2025 and 1.9 per cent in 2026," she said.

Her comments were seen as the clearest indication yet of a possible cut in October.

The bank's mid-term inflation target is 2 per cent. Lagarde and other ECB bankers had previously made clear that further cuts depended on the economic data.

The bank cut its key rate in September for the second time following a surge in inflation, after indicating a change in rate policy in June.

The current key interest rate, the deposit rate, was cut by 0.25 percentage points to 3.50 per cent.

Eurozone inflation data have moderated recently. Inflation fell noticeably in France and Spain in September to well under the 2 per cent mark.

German data published on Monday afternoon also showed a decline to an annual rate of 1.6 per cent. Eurozone figures, set to be published on Tuesday, are expected to reveal a further dip in inflation. 

--BERNAMA-dpa