Has the interest rate cut cycle ended? ECB President: The price target has been achieved, and we will ensure that the Eurozone inflation rate remains at 2%

In the current context of increasing divergence in global central bank policies, the latest statements from the European Central Bank (ECB) have sent positive signals.

On Monday, ECB President Christine Lagarde announced in an interview with French media that the ECB has "achieved price stability," and its 2% inflation target has been met:

"The inflation target has been achieved at 2%, and we will continue to take necessary measures to ensure inflation is controlled and prices remain stable."

This statement comes just before the release of the Eurozone's August CPI data, with Bloomberg economists also expecting the data to show that the Eurozone inflation rate is exactly 2%.

Expectations for Easing are Converging

From the statements of policymakers, the ECB is showing an increasingly robust stance. The minutes from the ECB's July meeting indicated that officials believe inflation risks are "generally balanced."

On Monday, Slovenia's central bank acting governor Primoz Dolenc stated in an interview that the ECB's "easing cycle has ended, and we can take a breather." He mentioned:

"Since July, there have been no new developments that would change this view, and we can maintain interest rates at current levels, as this ensures we achieve our inflation target in the future."

In this context, market expectations for further easing from the ECB this year are cooling, and investors are no longer certain that there will be another rate cut this year. Given that the inflation rate is near the 2% target and the economy remains strong, there is widespread expectation that the ECB will remain "on hold" for the second consecutive time at next week's meeting.

After the EU and the US reached a trade agreement, this view has become even more entrenched. "Uncertainty has always been the 'biggest issue'," Dolenc stated, "this agreement has eliminated that uncertainty. This is crucial."

He added that tariffs will be slightly higher than the forecasts made in June, but he also stated: "This will not significantly change our estimates for future economic activity, especially inflation expectations."

However, Bloomberg economists seem more optimistic, as they still expect one last rate cut in December.

Concerns Over Federal Reserve Independence

Lagarde also issued an unusually stern warning regarding the independence of the Federal Reserve during the interview. She bluntly stated that if Trump successfully controls the Federal Reserve, it would pose "very serious risks" to the US and global economy.

Lagarde mentioned Trump's unprecedented attacks on the Federal Reserve, including calls for rate cuts and attempts to dismiss board member Lisa Cook, stating that it would be "very difficult" for Trump to control the Federal Reserve:

"If he really did it, I think it would pose a very serious threat to the US economy and the global economy."

"Monetary policy has clearly had an impact on the US in maintaining price stability and ensuring the best employment for the country."

Lagarde emphasized that without autonomy, "I believe the stability of the US economy and the resulting impact on the world—because it is the largest economy in the world—would be very concerning."