2023-06-05 15:22:16
Prices in the euro zone remain under “strong pressure” meaning that inflation, apart from energy and food, may not have reached its peak, declared Monday the President of the European Central Bank ( ECB), Christine Lagarde.
“Price pressures remain strong,” said Ms. Lagarde during a hearing before the European Parliament, despite a slowdown in inflation over one year in the euro zone to 6.1% in May, following 7 % in April, far from the record of 10.6% reached in October.
Within this index, core inflation (which excludes energy and food) stood at 5.3% once morest 5.6% in April.
But the latest available data “suggest that inflationary pressure indicators” excluding energy and food “remain high” and “there is no clear evidence that underlying inflation has peaked,” warned Ms. Lagarde.
Above all, wage pressures have “further strengthened”, with employees wanting to recover some of the purchasing power lost due to high inflation, she said.
The ECB fears that a wage-price spiral may set in which might anchor inflation for the long term.
Companies are also continuing to pass on past increases in imported costs to their final prices, while bottlenecks in supply remain present, but these phenomena are tending to fade.
In this context, the ECB has not finished raising its rates, its preferred weapon for restoring price stability.
The key rates “will be reduced to sufficiently restrictive levels to allow a rapid return of inflation to our medium-term objective of 2% and will be maintained at these levels for as long as necessary”, insisted Ms. Lagarde.
Over the past nine months, rates have been raised by 3.75 percentage points, with a step of 0.25 points in May which was the weakest of the cycle.
The rates are “close to their cruising altitude”, slipped Ms. Lagarde last week.
A further rise is expected in June, probably another 0.25 points according to observers.
Some central bankers nevertheless see rate hikes continuing following June: “It is not certain that we will reach the peak in interest rates this summer,” said Joachim Nagel, president of the German central bank, on Monday.
According to its latest forecast in March, the ECB sees inflation returning to 2% “before the second half of 2025”, which would mark four years of price increases beyond the ECB’s target.
Prices in the euro zone remain under “strong pressure” meaning that inflation, apart from energy and food, may not have reached its peak, declared Monday the President of the European Central Bank ( ECB), Christine Lagarde.
“Price pressures remain strong,” said Ms. Lagarde during a hearing before the…
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