The European economy is showing signs of recovery from a year-long stagnation, according to ECB President Christine Lagarde. She noted that while the growth in the euro zone has been slow and meager, there hasn’t been a recession. However, employment and job market performance have been strong.
Lagarde revealed that the ECB is likely to cut interest rates at its next meeting in June to support growth. However, after that remains uncertain due to the Federal Reserve’s recent announcement of delaying reducing borrowing costs due to unexpected inflation readings. This could impact the euro’s value, with Lagarde stating that they will closely monitor currency fluctuations.
Geopolitical tensions in the Middle East pose another risk factor for the economy, as commodity prices such as oil and gas could affect inflation. Traders anticipate the ECB to make a quarter-point cut in June, with further reductions expected throughout 2024.
Lagarde emphasized the importance of monitoring exchange rate variations and their impact on inflation despite the ECB’s primary objective of price stability. She stated that fluctuations in currencies could lead to imported inflation, which will be taken into account when making monetary policy decisions.