ECB's Lagarde says 2% inflation target in reach

ECB's Lagarde says 2% inflation target in reach

The European Central Bank (ECB) President Christine Lagarde has expressed confidence in the ECB's ability to meet its 2% inflation target. In an interview published on Saturday, Lagarde stated that the ECB is within reach of its medium-term inflation target [1].

Earlier this month, the ECB revised its inflation projections for 2025 and 2026, projecting inflation of 2.0% and 1.6%, respectively [2]. Despite these revisions, Lagarde remains optimistic about the ECB's inflation outlook. She noted that financial stability is a prerequisite for price stability, and the ECB's efforts to create a digital currency are progressing [1].

ECB policymaker Boris Vujcic, who is also Croatia’s central bank governor, echoed Lagarde's sentiments. He advised against overreacting to small fluctuations in inflation, stating that a few tens of basis points' deviation from the target is not a problem [2]. Vujcic believes that energy prices will find a bottom, and the economy will accelerate, leading to an increase in inflation.

The ECB's strategy review, which includes the role of quantitative easing (QE) in reviving inflation, is also underway. Vujcic cautioned that while QE can help stabilize dysfunctional markets, its marginal efficiency declines if used for extended periods [2]. He emphasized that the ECB should consider the lessons from previous episodes of QE and set a higher bar for future use.

In conclusion, the ECB's President Lagarde and policymaker Vujcic both express confidence in the ECB's ability to meet its inflation target. They advise against overreacting to small fluctuations in inflation and emphasize the importance of financial stability and the ECB's strategy review.

References:
[1] Reuters. (2025, June 14). ECB's Lagarde says 2% inflation target in reach. Retrieved from https://ca.finance.yahoo.com/news/ecbs-lagarde-says-2-inflation-093219399.html
[2] Reuters. (2025, June 14). ECB should not overreact if inflation edges below 2%, Vujcic says. Retrieved from https://www.hellenicshippingnews.com/ecb-should-not-overreact-if-inflation-edges-below-2-vujcic-says-2/