European Central Bank (ECB) President Christine Lagarde said on Thursday that the euro area economy is likely to have stagnated in the fourth quarter of 2023 and that incoming data suggests "weakness in the near term." Inflation is expected to ease further throughout 2024. "Measures of shorter-term inflation expectations have come down markedly, while those of longer-term inflation expectations mostly stand around 2%," she said.
Lagarde said the ECB continued to see a declining trend in underlying inflation, "aside from an energy-related upward base effect on headline inflation," and that the past monetary tightening is being transmitted "forcefully" into financing conditions. She confirmed that the central bank sees the current interest rate levels will "make a substantial contribution" to reaching the 2% inflation goal if maintained "for a sufficiently long duration."
