During a hearing before the Committee on Economic and Monetary Affairs of the European Parliament today, ECB President Christine Lagarde indicated that inflation might “temporarily increase” in Q4, largely due to the previous sharp declines in energy prices dropping out of the annual inflation rate calculations.
However, she added that “the latest developments strengthen our confidence that inflation will return to target in a timely manner”. ECB will factor these dynamics into its next monetary policy meeting scheduled for October.
On the topic of economic growth, Lagarde acknowledged that the “suppressed level of some survey indicators” points to the challenges the recovery is facing. Nonetheless, she anticipates that the recovery will strengthen over time, as rising real incomes are expected to boost household consumption.
Lagarde reiterated ECB’s data-dependent approach and emphasized that ECB is “not pre-committing to a particular rate path”.
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