Christine Lagarde, the president of the ECB, sees inflation expectations “getting closer to the 2% objective over the medium term”. “Temporary bracketing the price spike in the pandemic scenario”, she further said on Friday.
“Measures of core inflation,” which exclude volatile energy and commodity costs, “are trending in the correct direction,” Christine Lagarde remarked at a Frankfurt financial conference.
Based on contacts the institute has had “with big European enterprises,” wage growth, a crucial component of this underlying inflation, “could start to strengthen gradually” next year, she noted.
The ECB bases its monetary policy on the assumption that inflation will stabilize at 2% in the medium term.
The present rate of inflation in the eurozone, which is around 4%, is at its highest level. It is “mainly driven up by the unusual circumstances caused by the pandemic.”
In the short run, skyrocketing energy prices and tensions connected to shortages may potentially hinder the rate of recovery.
“We are not taking this period of growing inflation lightly,” Ms. Lagarde insisted, because it “squeezes people’s actual incomes, particularly those at the lower end of the income scale.”
However, the institution must be “patient and persistent,” meaning that it must not tighten the monetary screw too rapidly in the hopes of slowing price rises.
“Unjustifiable tightening would provide an unwarranted barrier to the economy,”. “At a time when purchasing power already squeezed by rising energy and gasoline expenses,” she said.
She also reiterated that the institute’s key rates are currently at historic lows. Furthermore, they are “extremely unlikely” to rise “next year.”
The monetary arsenal, which includes asset purchases, will have to “help the recovery and the sustainable return of inflation to our 2% aim.”
The following should come out at the conclusion of the ECB’s Governing Council meeting, in December.
For MetaNews.