ECB President: High inflation easing imminent, the central bank will continue to cut interest rates

European Central Bank President Christine Lagarde said that the high inflation of recent years has eased, that inflation is close to its 2% target, and that the bank will continue to cut interest rates.

Speaking on Monday, Lagarde said the accuracy of economic forecasts had improved after a "long period of restrictive policies" and that officials could now shift their focus to managing future risks rather than dealing with the aftermath of past shocks. She also noted that while service sector inflation remained high, there were already signs that it could fall in the coming months.

Lagarde said: "Although we are not quite there yet, we are very close... If future data continue to support our baseline forecast, the direction of rate cuts is clear."

Eurozone inflation has fallen sharply from its peak, falling below 2 per cent earlier this year before rebounding slightly. For now, the ECB expects inflation to experience some volatility before it stabilizes.

Ms Lagarde stressed that inflation remained high in the eurozone as a whole, but that service sector price growth had "recently fallen markedly". She further explained: "These data suggest that services inflation is expected to fall further in the future, supporting the decline in headline inflation."

She added that an ECB indicator also suggested wage growth could slow to around 3 per cent next year, "a level we generally view as consistent with the inflation target".

Despite four successive cuts, the current level of interest rates continues to act as a brake on economic activity. Most officials believe that monetary policy is gradually transitioning to a neutral stance, that is, neither restraining nor stimulating economic growth. Market forecasts suggest a neutral rate could be achieved as early as the middle of next year.