European Central Bank's Inflation Goal

(Reuters) – European Central Bank (ECB) President Christine Lagarde said the euro zone was getting "very close" to reaching the central bank's medium-term inflation goal in an interview with the Financial Times on Monday.

Earlier in December, Lagarde mentioned that the ECB would lower interest rates further if inflation continued its decline towards the 2% target, indicating that curbing growth was no longer required.

> "We're getting very close to that stage when we can declare that we have sustainably brought inflation to our medium-term 2%," Lagarde told the FT, urging vigilance regarding services inflation.

Lagarde noted that inflation's latest reading was at 2.2%, but services inflation was still at 3.9%, remaining stagnant at around 4% but showing slight signs of decline.

Lagarde also opposed any retaliation from Europe concerning tariff threats made by incoming U.S. President Donald Trump, stating that such actions would negatively impact the global economy:

> "I said that retaliation was a bad approach because I think that overall trade restrictions followed by retaliation — this tit-for-tat, conflictual way of dealing with trade — is just bad for the global economy at large."

Irish central bank chief Gabriel Makhlouf echoed concerns about certain elements of services inflation in the euro zone.

However, he expressed uncertainty regarding 2025's outlook, noting the unpredictability of Trump’s actions. Makhlouf advocated for gradual interest rate cuts rather than abrupt changes, saying:

> "I have not seen, and I do not see currently, the need for a sudden big leap," referring to proposals for a 50 basis point rate cut. He emphasized that they should avoid complicating their price stability objectives with such insurance cuts.