Christine Lagarde, President of ECB, acknowledged the persistence of robust price pressures in her recent speech. She pointed out that both headline and core inflation continue to face “upside pressures… from the pass-through of past energy cost increases and supply bottlenecks.”
Speaking on the current state of underlying inflation, Lagarde said, “The latest available data suggest that indicators of underlying inflationary pressures remain high and, although some are showing signs of moderation, there is no clear evidence that underlying inflation has peaked.”
Lagarde also highlighted the intensifying wage pressures, noting that “wage pressures have strengthened further as employees recoup some of the purchasing power they have lost as a result of high inflation.”
Lagarde also drew attention to the forceful impact of the central bank’s rate hikes on financial conditions. “Our rate hikes are being transmitted forcefully to financing conditions for firms and households, as can be seen in rising lending rates and falling lending volumes,” she stated.
Notably, she mentioned that “the full effects of our monetary policy measures are starting to materialise,” adding that future ECB decisions are geared towards ensuring a “timely return of inflation to our 2% medium-term target.” She asserted, “Our future decisions will ensure that the policy rates will be brought to levels sufficiently restrictive… and will be kept at those levels for as long as necessary.”
