European Central Bank President Christine Lagarde appeared before the European Parliament's Economic and Monetary Affairs Committee on 15 February 2024 and cautioned against any move to cut interest rates before sufficient evidence had accumulated that inflation was sustainably converging towards the ECB's 2% target.
Lagarde stated before the committee that the ECB required more data before it could have the confidence necessary to begin reducing rates. Her appearance is a regular feature of the ECB's accountability obligations to the European Parliament.
MORE EVIDENCE NEEDED BEFORE EASING
Euro area headline inflation had declined from the double-digit peaks reached in late 2022, and the ECB had delivered 450 basis points of cumulative rate increases since July 2022. However, Lagarde emphasised that declining inflation was not equivalent to sustainably achieved target inflation, and that the 2% objective had not yet been securely met on a basis the Governing Council found convincing.
The Governing Council had been monitoring wage data closely.
Lagarde made clear that decisions would continue to be made on a meeting-by-meeting basis as new data arrived.
TWO PERCENT TARGET NOT SUSTAINABLY REACHED
The ECB's data-dependent framework, which Lagarde reiterated to the committee, means that future decisions will be driven by evidence on wages, profit margins, and underlying inflation across the currency bloc rather than by adherence to any pre-committed schedule.