(Bloomberg) -- Europe’s economy is nearing the end of a malaise that’s resulted in more than a year of near stagnation, according to European Central Bank President Christine Lagarde.

Output in the 20-nation euro zone is “recovering and we are clearly seeing signs of recovery,” Lagarde told the Council on Foreign Relations in Washington on Wednesday.

“We haven’t had a recession, but it’s been very, very slow and meager,” she said. But “you have an employment and a job market which is phenomenal.”

The ECB is almost certain to cut interest rates at its next meeting in June — offering some support for growth — though what happens after that is increasingly uncertain.

That’s in part because of the Federal Reserve, whose chair Jerome Powell signaled Tuesday that officials will wait longer than previously anticipated to reduce borrowing costs following a series of surprisingly high inflation readings.

A prolonged period of monetary easing in Europe with the US not acting to the same extent could dent the euro, with Lagarde saying officials will watch fluctuations “very carefully,” despite not targeting a particular level.

“While we have a single mandate with a primary objective of price stability, obviously we have to take into account the impact that exchange-rate variations will have on our inflation,” she said. “That movement of currencies may have an impact on inflation by way of imported inflation.”

Tensions in the Middle East are another risk factor. 

“We try to analyze the consequences,” Lagarde said. “One case in point which is obvious is what will be the impact on commodity prices, how will the oil and gas prices, which have been critically important in the last three years, how will that respond to the current shocks.”

Traders see the ECB making a first quarter-point cut in June as a near certainty. There are 80 basis points of reductions seen across 2024, which equates to three quarter-point moves and a 20% chance of a fourth.

--With assistance from Bastian Benrath and Alice Gledhill.

(Updates with more Lagarde comments starting in sixth paragraph.)

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