ECB President Christine Lagarde said in a speech, the impact of the factors driving up inflation currently “should fade over time”. But for the near term, “inflationary risks are tilted to the upside”. Over the medium-term, ” risks to the inflation outlook could arise if wages rise by more than anticipated, longer-term inflation expectations move above target or supply conditions durably worsen”.
But so far, “wage growth has remained muted – despite a strong labour market – and inflation expectations in the euro area stand around our target”.
On monetary policy, Lagarde said it will “depend on the incoming data and our evolving assessment of the outlook”. ECB would maintain “optionality, gradualism and flexibility” in the conduct of monetary policy.
