if “maintained for a sufficiently long duration.” The bank sees inflation declining to an average of 2.1% in 2025 after hitting a record-high 10.6% in October.
Higher rates are central banks’ chief weapon against excessive inflation. They influence the cost of credit throughout the economy, making it more expensive to borrow for things like home purchases or building new business facilities. That reduces demand for goods and, in turn, inflation but also risksThe ECB’s higher rates have triggered a sharp slowdown in real estate deals and construction — which are highly sensitive to credit costs — and ended a yearslong rally in eurozone home prices.
Lagarde said the economy “broadly stagnated” in the first six months of this year and incoming data points to “further weakness” in the July-to-September quarter. She cited ECB forecasts that expect the economy to pick up as inflation declines, giving people more spending power. The Associated Press is an independent global news organization dedicated to factual reporting. Founded in 1846, AP today remains the most trusted source of fast, accurate, unbiased news in all formats and the essential provider of the technology and services vital to the news business. More than half the world’s population sees AP journalism every day.
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