By Marta Vilar – MADRID (Econostream) – European Central Bank President Christine Lagarde said on Monday that the ECB was not yet seeing evidence that higher energy prices were feeding into wages, supporting a “measured” monetary policy approach while leaving the central bank ready to respond if second-round effects emerge.

“We’re not seeing anything that tells us as of yet that the second rounds are likely to come,” Lagarde told the European Parliament. “We do not see evidence at this point in time of energy prices feeding into higher wages.”

Lagarde said the ECB was closely examining collective bargaining agreements and wage negotiations in countries including Germany, France and Italy for signs that the energy shock was becoming embedded in inflation.

“It could, and if it does, we have to anticipate it as much as possible because when it’s there, it’s already a bit too late,” she said.

Lagarde said the ECB believed a “measured approach is appropriate” and was “in a good position to respond to future developments.”

“Interest rates do not move in lockstep with energy prices,” she said. “We are looking at how energy prices risk being embedded in inflation.”

Asked whether the current monetary policy stance was restrictive, Lagarde declined to give a yes-or-no answer, but said rates were at the upper end of the ECB staff's estimated 2%-2.5% neutral range.

However, she said that the ECB was not setting policy by reference to the neutral rate, but according to its three-part reaction function: the inflation outlook and surrounding risks, underlying inflation dynamics and monetary policy transmission.

Lagarde also said the recent rise in long-term interest rates would “probably slow growth” and reduce pass-through by more than projected in the ECB's September exercise.

On government measures to cushion higher energy costs, Lagarde said announced support amounted to around 0.1% of euro-area GDP, with ECB staff estimating a roughly 0.1 percentage point impact on inflation.