Lagarde warns of difficulty maintaining 2% inflation target

Christine Lagarde, president of the European Central Bank (ECB), stated it is becoming "impossible" to guarantee a 2% inflation target due to high uncertainty. This follows a recent interest rate cut and a shift in the ECB's guidance on future rate changes. Lagarde's comments suggest a slowdown in the pace of potential rate cuts, with banks now expecting fewer cuts by year-end. The ECB's 2% target, set in 2021, allows for short-term inflation fluctuations. She noted that increased public borrowing and potential trade wars could lead to more volatile inflation. The euro area is particularly vulnerable due to its reliance on global trade and energy imports.