Christine Lagarde Press Conference -inflation may be bumpy, Q4 2025 in the spotlight

European Central Bank cut interest rates in Eurozone by 25 basic points. ECB chair, Christine Lagarde is now on the press conference to comment this move as well as the Eurozone inflation and economic projections:

• Inflation in Eurozone dropped significantly, but now bank see a little higher CPI reading in 2024 and 2025
• ECB is determined to keep policy restrictive to achieve 2% inflation goal
• The ECB has decided to cut interest rates. Inflation has fallen sharply since September
• Inflationary pressure is clear, which is mainly related to high wages
• Inflation will remain above target this year and next year
• The ECB has decided to raise inflation forecasts for this year and next year
• ECB not committing to any interest rate path
• After a prolonged period of stagnation, growth in the eurozone has rebounded, albeit to a very low level
• Industry shows signs of stabilization. The economy will continue to rebound
• Higher wages are responsible for the recent rebound in inflation. The economy is definitely doing better
• Wage growth will slow and average below current levels over the current year
• Inflation will be probably mostly near current levels in the 2024 
• Measures of long term inflation expectations are quite low and under control
• Weaker world economy and tensions between the largest economies may disrupt eurozone economy rebound 
• Higher freight costs in the near term and climate crisis can drive up food prices, but inflation may also surprise to the downside if the economy worsens unexpectedly or higher interest rates hit sentiments and spending
• Inflation will fluctuate at current level this year, will fall in second half of 2025
• The robustness of Q4 2024 inflation projections formed basis of rate cut decision

Q&A session

• Confidence about inflation trends has increased in recent months
• The cut was related to certainty about the inflation path
• ECB will be data-dependent. Decisions will be made from meeting to meeting
• We need more data to confirm our basic, disinflationary path
• The next few months will be bumpy in terms of inflation
• The current situation is definitely more restrictive than in September
• Wages are key in assessing future inflation
• Inflation outlook, core inflation and monetary policy transmission - key criteria for interest rate decision

EURUSD (M5 interval)

Source: xStation5