'Strong likelihood' of rate cut next month, says Lagarde

"I'm really confident that we have inflation under control,” European Central Bank president Christine Lagarde told RTÉ’s Miriam O’Callaghan in an interview.

Christine Lagarde said the European Central Bank (ECB) was closing in on its target to control inflation. Picture: Arne Dedert/AP

European Central Bank president Christine Lagarde has all but confirmed that interest rates will be cut next month, but appears to have given no commitment over whether household and business borrowers can expect more relief through the rest of the year.

There is a “strong likelihood” that the central bank will cut interest rates when it meets in Frankfurt on June 6, “if the data that we receive reinforces the confidence level that we have”, Ms Largarde told RTÉ’s Miriam O’Callaghan in an interview.

“I'm really confident that we have inflation under control,” Ms Lagarde said, adding that the pressures that drove prices higher across the eurozone in the last two years have abated, including the costs of energy and the problems with global supply chains that link factories with consumers across the world.

The ECB was closing in on its target to control inflation, she said. 

“The forecast that we have for next year and the year after that is really getting very, very close to target, if not at target,” Ms Lagarde said.

So, I am confident that we've gone to a control phase."

Financial markets have already put a very high probability that the ECB would cut its 4% deposit rate by 25 basis points, or a quarter point, when it meets next month.

However, market participants have reined in their expectations of hefty rate cuts for the rest of the year, as ECB policymakers have, in recent days, talked down the possibility of so-called back-to-back rate cuts before the central bank takes its summer break.

The ECB started out on an aggressive policy of hiking rates in July 2022 in its campaign to rein in inflation.

Ms Lagarde also said that the election of Donald Trump as US president “will have consequences for Europe”.

“It's a matter for the American voters to decide, and I'm sure that they will make their decisions fully informed," she said. 

"What I know for a fact is that — given the programme that is being advertised during the campaign — it will have consequences for Europe for which we should prepare ourselves, whether it's through tariffs or through other ways and means.”