In the post meeting press conference, ECB President Christine Lagarde said incoming data since last meeting were in line with the baseline scenario of “ongoing, but moderate, growth” of the economy. Weakness in manufacturing sector remains a “drag” on momentum. But employment and wages growth continue to “support the resilience” of the economy. Inflation remains “subdued overall” but there were signs of moderate increase in underlying inflation.
Lagarde also repeated that “risks surrounding the euro area growth outlook, related to geopolitical factors, rising protectionism and vulnerabilities in emerging markets, remain tilted to the downside”. But risks were “less pronounced as some of the uncertainty surrounding international trade is receding.”
Headline inflation is “likely to hover around current levels” in the coming months. Inflation expectations have stabilized or ticked up slightly. Underlying inflation remained generally muted by there were indications of a moderate increase. weaker growth momentum is “delaying” pass-through of labor cost pressures to inflation.
