The European Central Bank will need to be cautious when deciding on further interest rate reductions and take its cue from incoming data, ECB President Christine Lagarde said on Wednesday in response to a question about market expectations for more and possibly bigger cuts.

"We need to be cautious because data will come up and will indicate to us what is the state of the economy, what is the state of inflation, of underlying inflation," she told an event in Washington. "And there will be a judgmental aspect to our decisions, but we will indeed have to be cautious in doing so."

(Reporting by Francesco Canepa in Frankfurt; Editing by Alison Williams)