ECB’s Lagarde Avoids Giving Steer for Policy Meeting, Sees Inflation at Target Next Year

4 December 2024

By David Barwick – FRANKFURT (Econostream) - European Central Bank President Christine Lagarde on Wednesday gave no hint as to next week’s monetary policy decision, reiterating the ECB’s refusal to pre-commit and the expectation that inflation would subside to the ECB’s 2% target sometime next year.

In prepared remarks before European Parliament, Lagarde said the ECB would decide next week in keeping with its data-dependent, meeting-by-meeting approach to policy. ‘We are therefore not pre-committing to a particular rate path’, she said.

Core inflation would persist around the current 2.7% level until early next year, she said.

‘Overall, growth in labour costs has been moderating in recent quarters – notwithstanding the volatility of negotiated wage growth over the summer – and is set to continue easing’, she said. ‘Domestic inflationary pressures are also receding as profits have been buffering still elevated labour cost developments.’

Due to base effects, inflation in 4Q would temporarily climb, subsequently ‘declining to target in the course of next year’, she said.

Uncertainty and downside risks characterised economic prospects, she said. The euro area was susceptible to external shocks due to its trade openness and reliance on global supply chains, she said.

In the short run, weaker services and ongoing anaemia in manufacturing would depress growth, she said.

‘Further ahead, the euro area’s economic recovery should start to gather some steam’, she said. ‘Consumer spending is expected to pick up as real incomes rise, and investment is expected to recover as the impact of past monetary policy tightening fades.’