European Central Bank (ECB) President Christine Lagarde said she does not believe the eurozone is headed for a recession, despite the negative trends seen in recent months.
Latest data from September showed annual inflation across the eurozone had fallen to 1.7%, with Ireland recording 0% inflation at the time, the lowest in the eurozone.
The ECB's medium-term inflation target is 2%.
However, the latest interest rate cut is seen as a way to support the euro zone economy, which has slumped in recent months. Germany, the euro zone's largest economy, is expected to record an economic contraction this year.
Lagarde told reporters on Thursday that based on the information it has, the ECB does not believe there will be a recession across the eurozone and is “still considering a soft landing.”
“If one member state, no matter how large, is facing a difficult situation based on its own production, this does not necessarily mean that the entire euro area will be affected in the same way. ” she said.
Lagarde acknowledged that economic activity was “slightly weaker than expected.”
“Industrial production has been particularly volatile over the summer, but the survey shows that manufacturing continues to contract.In terms of services, the survey shows an uptick in August, supported by a strong summer tourist season. However, the latest data shows that growth is slowing further.
“Business investment is expanding at a moderate pace, but housing investment continues to decline,” he said, adding that exports were sluggish.
Lagarde said she expects the economy to strengthen over time as rising real incomes lead to more household consumption and easing interest rates increases investment.
“We believe that the deflation process is on track and that all the information we have received over the past five weeks since the last monetary policy decision points in the same direction, lower. has decided to lower interest rates by 25 basis points. ”
The ECB will hold its last board meeting of the year in December, but the possibility of higher interest rates has not been ruled out.
Lagarde said she was not committing in advance to a specific interest rate path and that her December decision would depend on data.
He added that interest rates would remain “sufficiently restrictive for as long as necessary” to keep inflation consistently below 2%.
“Our interest rate decisions will be based on our assessment of the inflation outlook, taking into account upcoming economic and financial data, underlying inflation trends, and the strength of monetary policy spillovers,” he said. .
