European Central Bank chief says inflation to stabilize at 2% target in medium term

By Mucahithan Avcioglu

ISTANBUL (AA) - European Central Bank (ECB) President Christine Lagarde said Monday that inflation in the eurozone is expected to stabilize at 2% in the medium term, following its decline below the target level this year.

As the ECB kept the policy rate stable at 2% last week for the fifth meeting in a row, Lagarde said at a plenary debate of the European Parliament (EP) in Strasbourg: "In the current uncertain environment, our data-dependent, meeting-by-meeting approach to monetary policy serves us well."

"We will continue to follow this approach, basing our decisions on our evolving assessment of the inflation outlook and the risks surrounding it, in light of the incoming economic and financial data, as well as the dynamics of underlying inflation and the strength of monetary policy transmission," she stated.

The ECB president said they were working to keep inflation under control as part of efforts to strengthen the European economy, emphasizing that economic resilience and competitiveness depend not only on monetary policy but also on a broader policy framework.

Expressing concern about low productivity and weak growth rates in the eurozone, Lagarde called on legislative bodies to implement necessary structural reforms.

- Digital Euro

Sharing a comprehensive roadmap for the future of central bank money, the ECB president emphasized the continued use of physical cash, while also stating that a "digital euro" was of strategic importance for Europe's economic sovereignty.

Lagarde said such a currency "would be built on a fully European infrastructure, avoiding an excessive dependency on foreign providers for payments systems that are critical to the functioning of our economy."

Arguing that the digital euro will serve as a strategic shield for the European economy, Lagarde stressed that the system would be built entirely on European infrastructure.

Lagarde said the ECB is focused not only on individual payments but also on the digital asset ecosystem, aiming to unlock the potential of tokenization.

On the other hand, due to a sharp drop in energy prices at the beginning of the year, annual eurozone inflation fell to 1.7% in January, remaining below the bank's 2% target.

The ECB aims for 2% inflation across the entire euro area.