After months of monetary austerity, the European Central Bank (ECB) has started to take a break with lower interest rates and the intention is to continue on this path in October, said the director of the institution, Christine Lagarde, during an appearance. in the European Parliament, where he boasted of the results that restrictive policy has had in reducing inflation in recent months.
Although the ECB expects inflation to rise in the last quarter of the year due to the annual reference to previous significant falls in energy prices, it assumes that the downward trend will be the norm. “The latest events reinforce our confidence that inflation will return to its target in due time,” the ECB chief told MEPs in the Economy Committee.
And the goal is for inflation to be below 2%. The expected date for this to happen is 2026, at which point it is estimated that this rate will fall to 1.9%. 2025 would end with 2.2% and this year with 2.5%. The downward trajectory, which is largely linked to the improvement in price developments in Spain or Germany, is what Lagarde relies on to signal a further cut in interest rates. “We will take this into account at our next monetary policy meeting in October,” he said of the projections.
The inflation data – which will be published this Tuesday at European level with a forecast of decline – allowed Lagarde to benefit from monetary austerity, despite the suffocation that it has caused for months for mortgage creditors. Euribor now falls below 3% – a minimum not seen since November 2022 – and reduces real estate loans by 100 euros per month which are reviewed in October.
“We have made a lot of progress in the fight against inflation. In October 2022, it reached a maximum of 10.6%. By September 2023, the last time we raised interest rates, they had fallen by more than half, to 5.2%. Falling inflation and anchoring long-term inflation expectations have shown that our aggressive response is paying off. After nine months of stable rates, we saw inflation halve again, to 2.6%, in June, when we started lowering interest rates,” Lagarde said.
“Tariffs will remain sufficiently restrictive for as long as necessary to achieve our objective. “We are not committing to a specific rate trajectory,” he added of the ECB’s intention to cut interest rates every quarter until they reach 2.5% in the fall of 2025.
