European Central Bank announces it cannot declare victory against inflation

European Central Bank (ECB) President Christine Lagarde stated that the European Central Bank cannot yet declare victory against inflation and that it must remain "cautious" until it firmly returns to its 2 percent target.

In a speech in Berlin on Tuesday, Lagarde noted that the energy and supply chain shocks that drove up prices are now easing, while labor markets are still adjusting and wages are rising, saying: "We have faced a major inflation shock and we have made a major policy adjustment in response. The effects of this adjustment are being felt more and more, and inflationary pressures are easing."

"But we still have a journey ahead of us. Our monetary policy is at a stage where we must be cautious about the different forces affecting inflation, but we must always remain firmly focused on our mandate of price stability," Lagarde added.

The ECB left its deposit rate at 4 percent last month, and officials have emphasized that it must remain at this level for at least an extended period for inflation to be brought under control. Bank of France Governor Francois Villeroy de Galhau said in a statement on Monday that borrowing costs will likely remain stable for "the next few quarters."