ECB’s Lagarde: Inflation Has Come Down, but We’re Not There Yet

26 February 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank President Christine Lagarde on Monday said that there had been progress in inflation, but not enough to declare the fight won.

In an interview with Belgian television channel Kanaal Z, Lagarde said that the decline in inflation ‘has been very significant’, especially in the second half of 2023, and added, ‘But we’re not there yet, and we need to be absolutely confident that we will reach that target on a sustainable basis, it cannot be a one-shot 2%, we need to be confident that we have tamed inflation for good and that we will be at target.’

Remaining vigilant was necessary, as the new shocks shouldn’t be excluded, she said.

‘I think that we have to be constantly on alert because, you know, we have suffered shocks that we had no idea about and we have to be attentive to what comes next and be prepared for that’, she said.

The ECB analysed data in a ‘very very careful and very granular way’ to tailor and fine-tune its monetary policy, she said.

‘We have to really scrutinise to understand exactly what is underneath, what is most sensitive to monetary policy, what is not, what is labour-intensive. So, as a result of that we dissect all the data that we receive in terms of prices’, she said.

Current data showed that goods inflation was declining significantly, while services inflation was more resistant, which was ‘hardly surprising because services [are] much more labour-intensive’, she said.

She acknowledged that monetary policy wasn’t the only factor contributing to disinflation, but said that ‘as a result of us hiking interest rates, inflation has gone down significantly, as we discussed earlier, from 10.6[%] to 2.8[%], it’s a massive decline, as we had a significant hike of interest rates.’