PARIS (Reuters) – Uncertainty remains on the future path of inflation in the euro zone due in particular to the risks associated with increases in wages and corporate margins, warns the President of the European Central Bank (ECB), Christine Lagarde , in an interview published Friday in the daily La Provence.
The president, who is due to speak later in the day at the Aix-en-Provence Economic Meetings, believes that the fight against inflation is far from over, despite the ebb triggered by the drop in commodity prices and the first effects of monetary policy.
“In the current context, the important question is whether companies are going to reduce their margins a little to meet the wage increase expectations of their employees (…) or whether we are going to see a double increase, margins and wages”, says Christine Lagarde.
“Simultaneous increases in margins and wages would increase the risks of inflation, against which we would not remain inactive,” she warns.
Asked whether inflation was under control, the President of the ECB believes that the rise in prices “has begun to ebb” but that it remains far from the 2% target set by the central bank.
“So we still have work to do to reduce inflation and reach our target,” she said.
These comments confirm market expectations of further increases to come in key rates in the euro zone.
Markets believe a rate hike by the ECB at the July 27 monetary policy meeting is certain, with one more hike by October, according to the ECB Watch tool.
(Report Corentin Chapron, edited by Blandine Hénault)
Copyright © 2023 Thomson Reuters
I have over 8 years of experience working in the news industry. I have worked as a reporter, editor, and now managing editor at 247 News Agency. I am responsible for the day-to-day operations of the news website and overseeing all of the content that is published. I also write a column for the website, covering mostly market news.
