President Lagarde presents the latest monetary policy decisions – 30 January 2025
Jan 29, 2025
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Christine Lagarde, President of the European Central Bank, discusses key monetary policy updates. She highlights the decision to lower interest rates to combat rising inflation while aiming for a 2% target. Lagarde explores the euro area's economic stagnation, consumer confidence, and labor market conditions. She emphasizes the importance of flexibility in monetary strategies to ensure effective policy communication and transmission. Tune in for insights into the economic outlook and the challenges ahead!
The ECB has lowered interest rates by 25 basis points to align inflation with the 2% target amid economic stagnation.
Factors such as geopolitical tensions and weak consumer sentiment present significant risks to both economic growth and inflation forecasts.
Deep dives
Interest Rate Decisions and Inflation Targets
The Governing Council has decided to lower the three key interest rates by 25 basis points based on a revised assessment of the inflation outlook and economic conditions. This decision specifically targets the deposit facility rate as part of their strategy to ensure stable prices in the euro area. The goal remains to return inflation to the medium-term target of 2% within the year, as inflation is projected to develop in alignment with the European Central Bank's (ECB) expectations. Factors such as moderating wage growth and the buffering effect of profits have been noted as contributing elements to the ongoing disinflation process.
Economic Activity and Consumer Confidence
The euro area's economic activity stagnated in the last quarter, with manufacturing contracting while services showed some expansion. Consumer confidence remains fragile, influenced by the slow recovery of spending despite rising real incomes. A strong labor market characterized by low unemployment is expected to gradually improve consumer confidence and boost spending, especially as new credit becomes more accessible. The ECB remains optimistic that exports will support recovery, provided that global trade tensions do not escalate.
Risks to Growth and Inflation Outlook
Economic growth faces several downside risks, including geopolitical tensions that could disrupt trade and energy supplies, as well as the potential for prolonged effects of previous monetary policy actions. Upside risks to inflation remain present, driven by possible increases in wages and profits, as well as external factors like extreme weather events impacting food prices. Conversely, inflation could decline if consumer and investment sentiment weakens significantly, or if global economic conditions worsen unexpectedly. The ECB emphasizes the importance of continuous monitoring and flexibility in monetary policy to navigate these uncertainties effectively.
Today our Governing Council decided on monetary policy, determining what’s needed to return inflation to our 2% goal in a timely manner.
Listen to President Christine Lagarde present today’s decisions. The statement also covers:
• how the economy is performing
• how we expect prices to develop
• the risks to the economic outlook
• the dynamics behind financial and monetary conditions
Published and recorded during our press conference on 30 January 2025
Our monetary policy statement at a glance, 30 January 2025 https://www.ecb.europa.eu/press/press_conference/visual-mps/2025/html/mopo_statement_explained_january.en.html
Christine Lagarde, Luis de Guindos: Monetary policy statement, 30 January 2025 https://www.ecb.europa.eu/press/press_conference/monetary-policy-statement/2025/html/ecb.is250130~1f418aa0f4.en.html
Monetary policy decisions, 30 January 2025 https://www.ecb.europa.eu/press/pr/date/2025/html/ecb.mp250130~530b29e622.en.html
Combined monetary policy decisions and statement, 30 January 2025 https://www.ecb.europa.eu/press/press_conference/monetary-policy-statement/shared/pdf/ecb.ds250130~1ac86112bf.en.pdf?b9377ca85fd3aef4fb5af6f3189be827
European Central Bank
https://www.ecb.europa.eu/home/html/index.en.html
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