European Central Bank President Christine Lagarde said inflation figures will remain high in the coming quarters. In an interview with the Japanese newspaper Yomiuri Shimbun, she said the higher and longer those figures stay, the greater the risk to the ECB’s medium-term target of 2 percent. Euro area headline inflation is currently at twice that target.
Lagarde said the ECB would examine detailed breakdowns before deciding on rate steps next month. She said she has seen no second-round effects beyond those already included in staff projections. The bank monitors forward-looking indicators, multi-year wage agreements and firms’ wage expectations, and has so far seen no evidence of a shift.
December decision left open
Lagarde would not say what the ECB will do in December. “I cannot tell you today that we will definitely do that in December,” she said. She added that significant changes in the information would be needed for the course to differ from what the bank currently expects.
Two rate hikes have already been taken since the Iran war raised energy costs. Many policymakers have signalled a further increase of 0.25 percentage points for next month, according to the interview.
Global bond yields add pressure
Lagarde pointed to the recent jump in global bond yields as another headwind. The economy continues to grow solidly, she said. Our own market data shows the ECB main refinancing rate at 2.50 percent, in force since 6 November.
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Source: European Central Bank
