ECB's Lagarde Says Inflation Risks More Balanced, Signals End to Rate Hikes

European Central Bank President Christine Lagarde stated that inflation risks are now more balanced than two weeks ago, when the ECB raised interest rates to 2.25%. This shift in tone suggests the central bank is moving further away from additional rate hikes, signaling a potential pause or end to the tightening cycle. Lagarde's comments come amid easing inflation pressures in the eurozone, though core inflation remains elevated. The ECB had previously raised rates aggressively to combat high inflation, but recent data shows a slowdown in price growth. Lagarde's remarks indicate a more cautious approach going forward, with policymakers weighing the risks of overtightening against persistent inflation.

Global Impact

The ECB's shift reduces the risk of a hard landing in the eurozone economy, supporting growth and corporate earnings. However, it also signals that global central banks are nearing the end of their tightening cycles, which could weaken the euro against the dollar and other currencies with higher yields.