Lagarde Raises Alarm on Inflation: ‘Soft Landing Not Guaranteed’

ECB, Lagarde is worried about the international geopolitical situation. No forecast on rate cuts

Christine Lagarde consider the dark period for Europe not yet behind us and despite the drop in inflation, he calls for caution and remains cautious on forecasts. “We have come a long way in the fight against inflation, but our work – says Lagarde and Il Sole 24 Ore reports it – is not finished and we have to stay vigilant“. For this reason Lagarde has not given any indication on the next rate cut. It is expected that inflation will return below the 2% target in the latter part of next year, but Lagarde is now talking about “soft landing not guaranteed“. And then he goes into even more detail about the risks. “We need avoid a recession or a sharp deterioration in employment“, for this reason he does not intend to go out on a limb, also thanks to the recent storms of geopoliticsfrom which she voluntarily kept away.

“In October 2022, – continues Lagarde – inflation peaked at 10.6%. In September 2023, the last time we raised rates, it had fallen by more than half, to 5.2%. And then, after nine months of us kept rates steadywe saw inflation halve again to 2.6%which led us to cut rates for the first time in June.” Lagarde’s speech analyzed the risks, path and costs of monetary policy, highlighting the impact of rate hikes on the economy. “But if our policy path has contributed to tame inflationit also has economic growth slowed down“, Lagarde pointed out, adding that “rates have risen steadily and remained high while the economy stagnated for five consecutive quarters“.

“There strength of the labor market – concludes Lagarde – allows us to take time to gather new information, but we must also be aware of the fact that the growth prospects remain uncertain – he said -. All this is the basis of our determination to depend on data and to make our political decisions meeting by meeting“.