ECB

European Central Bank (ECB) President Christine Lagarde highlighted that global economic growth is slowing, with the Euro area facing intensified trade uncertainties, weak domestic demand, and declining corporate investment. Although inflation has receded, the tight labor market and strong wage growth could still push core prices higher. Should the economic slowdown persist, rate cuts could become an option.

Greek central bank chief Yannis Stournaras argued that it is premature to discuss pausing interest rate cuts, especially given the current economic pressures and the gradual easing of price pressures.

Global market expectations for long-term interest rates have fundamentally shifted, and central banks need to adapt to the new inflationary environment and respond with appropriate policy responses.

Joachim Nagel, President of the Deutsche Bundesbank and a member of the European Central Bank's (ECB) Governing Council, emphasized on Wednesday that the ECB should not rush to rate cuts further, especially as rates approach the neutral level.

The euro area economy grew modestly in 2024. While output stagnated in the fourth quarter, it was still 0.9% higher than at the end of 2023.

The European economy faces downside risks, with energy price fluctuations and uncertainties in international trade being the main challenges. On inflation, the ECB remains confident about achieving the 2% target by 2025, adopting gradual rate cuts to ease pressure and stabilize the economy. Although the labor market is relatively stable, strong wage growth could fuel inflation, necessitating a balance between job creation and wage control.

On October 24th, ECB Governing Council Member Wunsch stated that it's too early to talk about a 50-basis-point interest rate cut in December. Meanwhile, Governing Council Members Kazaks and Muller argued for maintaining a gradual path of interest rate reductions, and Nagel suggested that the ECB should not rush into cutting rates.

On October 22, ECB officials Olli Rehn and Francois Villeroy de Galhau said that Europe's weak economic growth could further reduce inflation. ECB President Christine Lagarde indicated that the direction of the ECB's rate cuts is clear, and the central bank will prudently handle the magnitude and pace of rate cuts based on actual conditions.

Christine Lagarde, president of the European Central Bank President (ECB) said at a press conference on Thursday that economic activity has been somewhat weaker than expected. The latest data points to weaker growth and downside risks to growth. The disinflation process is well on track, but wage pressures remain strong. Inflation is expected to rise in the coming months before falling back to target levels next year.