European Central Bank Cuts Key Interest Rate but Says "Long Way to Price Stabilization"

Christine Lagarde ECB President Newspaper Op-Ed Article

The European Central Bank (ECB) unexpectedly cut its key interest rate due to a slowdown in the surge of inflation, but it assessed that there is still a long way to go to control prices.

According to AFP, ECB President Christine Lagarde wrote in several European newspapers published on the 7th (local time) that inflation has "significantly slowed down" and that the inflation rate is expected to fall to the target of 2% by next year.

President Lagarde said, "However, there is still a long way to go before inflation is pushed out of the economy," adding, "It will not be a completely smooth journey."

She stated, "Therefore, interest rates need to be kept restrictive for as long as necessary to ensure sustained price stability," and added, "In other words, even if we do not strongly suppress (inflation) as before, it is necessary to apply brakes for the time being."

The year-on-year consumer price inflation rate in the Eurozone exceeded 10% at the end of 2022 but has remained in the 2% range since October last year.

The ECB held a monetary policy meeting in Frankfurt, Germany, the day before and lowered all three key policy rates?the key interest rate, the deposit rate, and the marginal lending rate?by 0.25 percentage points each to 4.25%, 3.75%, and 4.50%, respectively.

This cut in the key interest rate is the first in 8 years and 3 months since the zero interest rate policy began in March 2016, and based on the deposit rate, it is the first cut in 4 years and 9 months since it was lowered to -0.5% in September 2019.

This rate cut is expected to inject vitality into the Eurozone economy (20 countries using the euro).

President Lagarde emphasized, "We have made great progress, but the fight against inflation is not over," and stressed, "As the guardian of the euro, we are committed to ensuring that prices remain low and stable for the benefit of all Europeans."

This content was produced with the assistance of AI translation services.