We need your help now

Support from readers like you keeps The Journal open.

You are visiting us because we have something you value. Independent, unbiased news that tells the truth. Advertising revenue goes some way to support our mission, but this year it has not been enough.

If you've seen value in our reporting, please contribute what you can, so we can continue to produce accurate and meaningful journalism. For everyone who needs it.

Last year, the ECB increased interest rates nine times in a row. Alamy
European Central Bank

'Strong likelihood' ECB will cut interest rates in the coming weeks

Though she did not commit to the interest rate cuts, Christine Lagarde said the ECB are confident the inflation rate will fall.

THERE IS A “strong likelihood” that the European Central Bank will cut interest rates in the coming weeks, chief of the regulator Christine Lagarde has said.

In an interview with RTÉ News this evening, Lagarde said that while the decision will be based on the data provided to the European Central Bank (ECB), the regulators are confident that the Euro is strong enough to cut interest rates.

Last year, the ECB increased interest rates nine times in a row as it attempted to bring the inflation rate of the Euro to 2%.

While the regulators were successful at stopping the currency from inflating further, the Euro was left in a “fragile” state and the increases had huge impacts on mortgage and loan holders.

Criticism was later thrown at Irish lenders for not transposing the full extent of ECB rate rises through to borrowers quick enough – in turn, making it more expensive for banks. Analysts have attributed this decision to customer apathy within banks.

In some much-needed respite for borrowers, however, the head of the EU bank has signalled, for the first time in over a year, that it is very likely that rates will begin to fall as regulators are confident their job is done.

Though Lagarde, President of the Bank, said she was not going to make any commitments, she added:

“If the data that we receive reinforces the confidence level that we have – that we will deliver 2% inflation in the medium term, which is our objective, our mission, our duty – then there is a strong likelihood.”

A reduction in these interest rates will see lower mortgage rates in the medium term and borrowing money will become less expensive for banks and other regulated lenders.

Lagarde said the main factors driving inflation are “fading away”, such as the energy crisis and supply chain issues as a result of the Russian invasion of Ukraine. 

“I’m really confident that we have inflation under control,” she said.

“The forecast that we have for next year ,and the year after that, is really getting very, very close to target, if not at target.

“So, I am confident that we’ve gone to a control phase,” she added.

Potential risks to this success, Lagarde warns, could come in the form of Donald Trump returning to the White House. The chief regulator expects that Trump’s reelection will have consequences for Europe. 

“What I know for a fact is that – given the programme that is being advertised during the campaign – is that it will have consequences for Europe for which we should prepare ourselves, whether it’s through tariffs or through other ways and means.”

Other ways could include cuts in monetary support for Ukraine from the US, as Trump is largely expected to cut supplies to the war-torn country.

This could lead to the EU having to pick up the tab, as it has committed to supporting the nation until (and after) the end of the war.

According to Politico the funding framework set up to support Ukraine during the war and in reconstruction is already running low – and leaders are looking to increase payments next year.

“We just have to get ready, because we are strong, we are a big economic zone, and we shouldn’t be followers, we should be leaders.”

She added that there are future risks the ECB must consider, even after the fall of inflation, but that the regulators’ goal is to continue maintaining the security of the Euro, regardless of the challenge.

She said that she has not considered her future after the ECB, and will not, until the inflation rate reaches 2%.

“That’s what I want to do,” she said. “And then I’ll think about life.”

Readers like you are keeping these stories free for everyone...
A mix of advertising and supporting contributions helps keep paywalls away from valuable information like this article. Over 5,000 readers like you have already stepped up and support us with a monthly payment or a once-off donation.