The European Central Bank must think hard about how it deals with risks and uncertainty in an era of more-volatile inflation and less clarity about monetary-policy transmission, President Christine Lagarde said.

A big interest rate cut from the U.S. Federal Reserve on Wednesday raised bets on further policy easing at the European Central Bank in October but this is still not the most likely outcome given different economic realities.

ECB President Christine Lagarde praised the "remarkable" unwinding of inflation with minimal job losses, projecting inflation to hit target by 2025. However, she warned that significant uncertainties remain.

European Central Bank Governing Council member Klaas Knot said he’s comfortable with investor bets on further interest-rate cuts.

Profound shifts in the world economy could make inflation volatile for years to come, complicating efforts to control prices, but sticking with inflation-targeting regimes is still the best option, European Central Bank President Christine Lagarde said on Friday.