World Stock Watch

Euro Zone Inflation Nears Target, Says ECB President

The European Central Bank (ECB) is on the cusp of achieving its medium-term inflation goal, according to ECB President Christine Lagarde. In a recent interview, Lagarde expressed optimism that the euro zone is nearing the 2% inflation target, citing the latest reading of 2.2%.

Services Inflation Remains a Concern

However, Lagarde also sounded a note of caution, highlighting that services inflation remains stubbornly high at 3.9%. This sector has been hovering around 4% and shows little sign of budging. The ECB President emphasized the need for continued vigilance in this area.

Opposition to Retaliation

Lagarde also weighed in on the ongoing trade tensions between Europe and the US, stating her opposition to retaliatory measures against incoming President Donald Trump’s tariff threats. She believes that such actions would be detrimental to the global economy, instead advocating for a more collaborative approach to trade.

Irish Central Bank Chief Shares Concerns

Gabriel Makhlouf, the Irish central bank chief and member of the ECB’s governing council, echoed Lagarde’s concerns about services inflation. He too warned that some elements of this sector are cause for concern.

Uncertainty Clouds 2025 Outlook

Makhlouf also expressed uncertainty about the outlook for 2025, citing the unpredictability of Trump’s actions. Despite this, he remains committed to gradual interest rate cuts, rather than sudden, drastic measures.

Gradual Approach to Interest Rates

Makhlouf emphasized that the ECB should avoid making “insurance cuts” that could compromise its price stability objective. Instead, he advocates for a gradual approach to interest rate cuts, unless the facts and evidence suggest otherwise.

A Delicate Balance

As the euro zone inches closer to its inflation target, the ECB must navigate a delicate balance between supporting growth and keeping inflation in check. With services inflation remaining a concern, the central bank’s next moves will be closely watched by markets and economists alike.