Bad news for inflation in Europe, says Lagarde

If it wasn't yet clear that inflation in the Eurozone remains high, Lagarde reiterated it again.
While everyone is now looking with concern at the war scenarios capable of upsetting the already fragile world and European economic balance, with energy prices observed special, the crucial issue for the future of the old continent seen in slowdown is undoubtedly the fight against inflation of the ECB.
The governor, speaking at the International Monetary Fund's annual meeting in the Moroccan city of Marrakech, broadly repeated last month's assessment of the economy, stressing that progress is still needed in containing consumer prices.
What Lagarde said and what to expect in the coming months.
read also Fed and ECB rates, does everything change with the conflict in Israel? New purchasing opportunities Inflation is still a problem, Lagarde's words “Core inflation remains at high levels, reflecting the fact that the impact of the decrease in the increase in production costs is counterbalanced by the increase in the of work”, this is how Lagarde warned about what is really happening in the Eurozone.
“Indeed, employees' demand for compensation for lost purchasing power in a tight labor market has led to historically high wage growth,” he added.
The issue of the wage-price spiral is very delicate and assessed with great attention in Frankfurt, as it is capable of generating further inflationary surges.
Inflation is expected to slow further to the 2% target in 2025, he noted, reiterating officials' collective forecast at their Sept.
14 meeting.
That meeting decided to raise interest rates for the tenth time in a row, with a commitment to keeping them high and further increases are not ruled out.
“Wage growth is expected to decline gradually, while remaining elevated over the projection horizon, driven by minimum wage increases and offsetting inflation amid tight, albeit cooling, labor markets,” it said.
read also Will only the recession bring inflation to the 2% target? What to expect? Lagarde suggested that assessing the impact of previous rate hikes remains crucial.
Just as it will be fundamental to understand whether demand will be weaker, due to a stronger transmission of monetary policy or a worsening of the international economic context and therefore could push prices down.
With the threat, however, of causing the Eurozone to fall into recession.
Lagarde also offered an uncertain view on the prospects for expansion.
“Growth could be slower if the effects of monetary policy prove stronger than expected, or if the global economy weakens further and geopolitical risks intensify,” he said.
“Growth could also be higher than expected if the strong job market, rising real incomes and decreasing uncertainty strengthen confidence among consumers and businesses and push them to spend more.” The latter scenario could push inflation higher for much longer.