In a speech to the European Parliament, ECB President Christine Lagarde reiterated that “we intend to raise interest rates by another 50 basis points at our next meeting in March”, and the “evaluate the subsequent path”. Future policy decisions will continue to be “data-dependent” and follow a “meeting-by-meeting approach”.
While headline inflation moderated to 8.5% as shown in January flash estimate, “price pressures remain strong and underlying inflation is still high” with core inflation at 5.2%. “Even though most measures of longer-term inflation expectations currently stand at around 2%, these measures warrant continued monitoring.”
Risks to growth outlook are “now more balanced” than they were in December. Russia’s war against Ukraine continues to be a “significant downside risk”. But “faster resolution of the energy shock would support growth”. Risk to inflation outlook “have also become more balanced, especially in the near term.”
