The ECB President was heard on Monday in the European Parliament and stressed that the mandate continues to stabilize prices. In the coming months there may be increases in inflation, but due to the base effect.
External pressures have been replaced by internal pressures, and now it is wages that threaten to fuel inflation in the coming months, European Central Bank President Christine Lagarde said on Monday, during a hearing in the Economic and Monetary Affairs Committee. From the European Parliament.
The head of the monetary authority noted that “the European Central Bank’s internal inflation index – which excludes items with a high import content – has not decreased much, reflecting the fact that inflation is now driven more by internal than external sources.” to “wage pressures”. [que]However, it remains strong.”
In explaining this file, Lagarde refers to the impact of the “recovery linked to previous inflation,” more than its impact on future dynamics, recalling that inflation in October fell to 2.9%. Moreover, the ECB President asserts, “We expect wages to continue to be a key factor driving domestic inflation,” with the “earnings effect” – identified as one of the drivers of inflation in the past year and a half – “now weakening.” In other words, there has been a change in the factors fueling inflation, moving from external elements, such as energy and supply chain constraints, to internal causes.
For the immediate future, Lagarde acknowledges that there will be “slight” increases in inflation, “mainly due to some fundamental effects.” However, he added, “the medium-term inflation outlook remains surrounded by a great deal of uncertainty.”
Continuing the restrictive policy until necessary
In her opening speech, the President of the European Central Bank stressed that the monetary authority “remains determined to ensure a timely return of inflation to the medium-term target of 2%,” noting that “in October, we decided to keep key interest rates unchanged and we expect… Maintain current levels for long enough,” Lagarde admitted.
The ECB President also reiterated that “future decisions will ensure that interest rates are set at sufficiently restrictive levels for the longest period necessary”, always with the logic of analyzing the data as it is released, pointing to the next monetary policy meeting in December. fourteenth. He pointed out that “the Board of Directors will re-evaluate its monetary policy position in mid-December, based on new data and updated expectations, including for 2026.”
