2023-06-27 09:50:34
The European Central Bank (ECB) will “continue” its rate hikes at its July monetary policy meeting because it is too early to “declare victory” in the fight against inflation in the euro zone, its president Christine Lagarde has said. Tuesday.
“Our work is not finished. Unless there is a significant change in our outlook, we will continue raising rates in July,” she told an ECB forum in Sintra, Portugal.
The guardian of the euro decided in June on an eighth increase in its key rates in less than a year, by a quarter of a percentage point, to bring its benchmark rate on deposits to 3.5%.
The ECB embarked on this unprecedented cycle of monetary tightening a year ago to counter soaring prices and some voices are now calling for a pause so as not to weigh further on economic activity.
On the contrary, the official warned on Tuesday against a “too rapid reversal of monetary policy” in the face of a “more persistent inflation process” in the euro zone.
The rise in prices in the euro zone fell back to 6.1% over one year in May, far from the record of 10.6% reached in October, but also far from the target of 2%.
“Inflation moves through the economy in phases, as different economic agents try to pass costs on to each other,” Lagarde explained.
The phenomenon is thus now stimulated by rising wages, as part of a “sustainable process of catching up” in purchasing power.
“Several years of wage increases await us,” said Ms. Lagarde on Tuesday.
She also called on companies to do their part by absorbing “rising labor costs within their margins” rather than raising prices.
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