ECB’s Lagarde: Medium-Term Inflation Outlook Remains Uncertain

27 November 2023

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank President Christine Lagarde on Monday said that the ECB expected the disinflationary process to continue but that there was still substantial uncertainty regarding the medium-term outlook.

In a speech at the European Parliament in Brussels, a text of which was posted to the website of the ECB, Lagarde said, ‘Looking ahead, we expect the weakening of inflationary pressures to continue, even though headline inflation may rise again slightly in the coming months, mainly owing to some base effects. However, the medium-term outlook for inflation remains surrounded by considerable uncertainty.’

Wages were expected to remain a driver of domestic inflation, she said. ‘Our current assessment is that this [wage pressure] mainly reflects “catch-up” effects related to past inflation rather than a self-fulfilling dynamic.’

It was 'not the time to start declaring victory’ over inflation, she said, adding that it was necessary to be focused on the pursue of price stability and attentive to the elements that could affect it.

The ECB’s future decisions would ‘ensure that policy rates are set at sufficiently restrictive levels for as long as necessary’, she said.

‘The appropriate level and duration of restriction will continue to be determined in a data-dependent manner, assessing the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission’, she said.

Climate change and environmental protection were important to the ECB’s primary and secondary objectives, she noted.  

‘As it is relevant to our primary mandate, we are also working to better take into account climate-related financial risk in the Eurosystem’s balance sheet’, she said. ‘In doing so, we are also following our secondary objective, by supporting the green transition of the economy, in line with the European Union’s climate neutrality objectives.’