ECB Lagarde: Economic outlook deteriorated, inflation drivers changing

ECB President Christine Lagarde, struck a somber tone during the post-meeting press conference. She acknowledged that the economic outlook for Eurozone has “deteriorated” in the near term, citing persistent high inflation and tighter financial conditions as key factors pressuring the manufacturing output.

Lagarde stated, “High inflation and tighter financing… is weighing especially on manufacturing output, which is also being held down by weak external demand.” Though she noted the resilience in the services sector, she cautioned that its “momentum is slowing”. The economy is expected to “remain weak in the short run.”

She then noted a shift in the drivers of inflation. External sources are easing, she noted, but domestic price pressures, including from rising wages and robust profit margins, are gaining prominence. “While some measures are moving lower, underlying inflation remains high overall,” Lagarde pointed out.