The ECB has raised rates by 2.5 percentage points since July to address the historic rise in inflation, promising to tighten policy at upcoming ECB meetings. Especially now that inflation seems to remain structurally above 2 percent.
“We notice that wages continue to rise, even faster than expected,” Lagarde told Jutarnji. “We shouldn’t let our inflation expectations run wild or allow wages to drive inflation up.” He said nothing about a possible new policy, but said the ECB “must take the necessary steps” to bring inflation down from 10 to 2 percent.
‘to be careful’
Lagarde also said that we need to be careful about the causes of inflation. “We see that these causes are mainly related to fiscal measures and wage dynamics,” he says. “And we have to be careful not to let inflation become entrenched.”
He added that if there were to be a winter recession, it would likely be very short-lived and shallow. “Provided no further shocks are involved,” she concluded.