The European Central Bank cut its economic growth expectations for the euro zone once more on Thursday and raised its projection for inflation this year, even as it predicted price growth back at target in 2026.

Christine Lagarde said the central bank is switching “to a more evolutionary approach” as it will take longer for inflation to cool towards its 2pc target.

Although the ECB would not pre-commit to future rate cuts, the fact that Christine Lagarde did not push back on lower rate cut expectations is a sign that the ECB is comfortable with a neutral rate around 2%.

The monetary chief told reporters in Frankfurt on Thursday that a huge increase military spending is likely to boost the economy

Inflation in Europe eased to 2.4% in February, supporting the case for another interest rate cut from the European Central Bank but leaving open how far the central bank will go in lowering borrowing costs.