Europe’s economy is slowly recovering from a year-long period of stagnation, according to European Central Bank President Christine Lagarde. Though progress has been slow and meager, there hasn’t been a recession, and the job market has shown strong performance.
At its next meeting in June, the ECB is likely to cut interest rates to support growth. However, after that remains uncertain due to the recent announcement by the Federal Reserve of delaying reducing borrowing costs due to unexpected inflation readings. This could impact the euro’s value, and Lagarde mentioned that they will closely monitor currency fluctuations.
Lagarde highlighted geopolitical tensions in the Middle East as another risk factor for the economy. The impact of these tensions on commodity prices, particularly oil and gas, could affect inflation. Traders anticipate the ECB to make a quarter-point cut in June, with further reductions expected throughout 2024.
Despite its primary objective of price stability, Lagarde emphasized the importance of monitoring exchange rate variations and their impact on inflation. She stated that fluctuations in currencies could lead to imported inflation, which the ECB will take into account when making monetary policy decisions.