Christine Lagarde, President of the European Central Bank (ECB), addressed the World Economic Forum (WEF) in Davos on Friday, marking her final appearance at the annual meeting. This followed her participation in panel discussions on “How to Trust Economics” and “Uniting Europe’s Markets” earlier in the week.

During the panel discussion on “The Global Economic Outlook” on Friday, Lagarde refrained from discussing monetary policy specifics due to the ECB’s entry into a “blackout period” ahead of the upcoming policy meeting. The debate centered on how policymakers would balance the imperative for action on growth and inflation, employing the right tools to ensure sustained and long-term economic growth.

Lagarde acknowledged the decrease in inflation both in the Eurozone and globally, as well as indications of a loosening job market. She emphasized the transition from normalization to a state of “non-normality.” Lagarde highlighted the role of consumption as a driving force for economic growth but noted that this momentum is waning. With less tight job markets and declining excess savings, she observed that consumption is not as robust as before.

In a Bloomberg interview on Wednesday at Davos, Lagarde mentioned the likelihood of rate cuts by the summer, prompting a recalibration of early rate cut expectations in the markets. Despite this, ECB policymakers have consistently pushed back against aggressive rate cut expectations, emphasizing a data-dependent approach to interest rate decisions.

The ECB maintained rates for the second consecutive meeting in December, accompanied by a downward revision of growth and inflation forecasts. The central bank’s statement underscored a commitment to setting policy rates at sufficiently restrictive levels for as long as necessary, reflecting a cautious stance amid evolving economic conditions.