(Reuters) - The European Central Bank kept borrowing costs at record highs on Thursday but sent a clear signal that it may be preparing to cut them as euro zone inflation continues to fall.
Following are highlights of ECB President Christine Lagarde's comments at a news conference after the policy meeting.
BUMPY INFLATION ROAD
"We will have those bumps on the road, if you will, but we're reaching the target in mid-'25, so return to 2% in mid-'25, between now and '25. There will be ups, there will be downs and, as I said, a lot of that is related to the base effects that result from the two significant changes in energy prices in the course of '23.
"I think what is really important is the overall data. It's the protection we have embedded in our projection of last March... What we need to see is how much away from those bumps embedded in the baseline we are likely to go if we are facing a supply shock.
"But bumps will be there. It will not be linear."
NOT WAITING TILL ALL INFLATION SEGMENTS HIT 2%
"We're not going to wait until everything (every inflation segment) goes back to 2% to make the decisions that will be necessary."
US VS EURO ZONE INFLATION
"I don't think you can draw conclusions ...based on the assumption that the two inflations (euro zone and U.S.) are the same. They are not the same. The two economies are not the same."
FEW DISSENTERS, BUT THEY JOINED CONSENSUS
"Truth be told, a few members felt sufficiently confident (that inflation was returning to target) on the basis of the limited data that we received in April - it was just a few members - and they agreed to rally to the consensus of a very very large majority of the governors who were comfortable with the need to reinforce confidence when receiving a lot more data in June."
ON BALANCE SHEET REDUCTION
"The size of our balance sheet has quite significantly reduced already ... and that process is ongoing ... but there is no further discussion on that."
NO PRE-COMMITMENT
"We are not pre-committing to a particular rate path."
UPCOMING DATA
"In April we get some information and some data and we looked at all that but in June we know we will get a lot more data and a lot more information. And we will also have a new projection which we will incorporate and be informed by all that will be published before the projection is completed.
"We are data dependent, we will be looking at all this information, all this data, and projection results that will be produced by the entire euro system."
DOWNSIDE GROWTH RISKS
"The risks to economic growth remain tilted to the downside. Growth could be lower if the effects of monetary policy turn out stronger than expected."
DIMINISHING PRICE PRESSURES
"Most measures of underlying inflation fell further in February, confirming the picture of gradually diminishing price pressures."
ON INFLATION OUTLOOK
"Inflation is expected to fluctuate around current levels in the coming months and to then decline to our target level next year."
ON LABOUR MARKET
"The tightness in the labour market continues to gradually decline."
GRADUAL RECOVERY
"Surveys point to a gradual recovery over the course of this year, led by services."
WEAK ECONOMY
"The economy remained weak in the first quarter. While spending on services are resilient, manufacturing firms are facing weak demand."
(Reuters Global News Desk)