economy
ECB ready to hike rates even if expected inflation surge is short-lived, Lagarde says
The ECB kept interest rates on hold at its last monetary policy meeting last week.
TL;DR
- The ECB is ready to hike interest rates even if an expected jump in euro zone inflation proves temporary.
- ECB President Christine Lagarde indicated that a significant, though not overly persistent, overshoot of the inflation target could warrant a measured policy adjustment.
- The war in Iran has caused global oil and gas prices to soar, upending inflation forecasts in Europe.
- The ECB has revised its inflation forecast, now expecting headline inflation to average 2.6% in 2026.
- In a more adverse scenario, inflation could peak at 4% this year, or over 6% early next year in a severe base case.
- ECB chief economist Philip Lane mentioned that companies' price-hike expectations and wages for new hires are key inflation indicators to monitor.
- Private sector output in the euro zone's manufacturing and services sectors has fallen to a 10-month low.