The European Central Bank (ECB) will start cutting interest rates after it is convinced that inflation is moving towards its 2% target, ECB President Christine Lagarde said on Thursday, according to Bloomberg, citing Agerpres.

“I cannot give you a specific date when the rates will be reduced. But I can tell you that if we win the fight against inflation, that is, we will have confidence that inflation will be less than 2%, then interest rates will start to decrease,” said Christine Lagarde in an interview with the France 2 television station.

To combat high inflation, the ECB launched an unprecedented cycle of monetary policy tightening, so that between July 2022 and September 2023, the “guardians” of the euro increased the cost of credit in ten consecutive tranches.

The pace of consumer price growth has slowed significantly since inflation peaked in double digits at the end of 2022, but remains above the ECB’s 2% target. According to Eurostat, annual inflation in the eurozone slightly accelerated in December to 2.9% from 2.4% in November.

Although inflation remains below 3%, even after the jump in December, ECB officials are waiting for data on wage increases, which will not be available until the first quarter. While a sharp downturn in the eurozone economy may change their thinking, their baseline scenario remains a soft landing scenario.

The head of the European Central Bank assures that the difficulties in the fight against inflation are over

Lagarde stressed that Europe is not in a serious recession and that the most difficult moment in the fight against inflation has passed. His comments came after Luis de Guindos, vice president of the European Central Bank, warned on Wednesday that the euro zone could have slipped into recession in the final quarter of last year.

“I believe that we have passed the most difficult period, unless we face another major upheaval. This does not mean that we will have a smooth decline,” Lagarde said on Thursday, who mentioned wages in particular.

“Wages, in terms of negotiations and collective agreements, are about to be raised above the inflation we have. We are in the catch-up phase, which will last two to three years,” the ECB president said.

Currently, the interest rate on deposits, the basic indicator of credit activity in the eurozone, is at a historical high of 4%.

At its latest monetary policy meeting in mid-December, the ECB stressed that the fight against inflation is not over, but left interest rates unchanged for the second month in a row.