ECB's Lagarde Says Eurozone Inflation Outlook Surrounded By Considerable Uncertainty
(RTTNews) - Euro area price growth outlook continued to be surround by significant uncertainty and it is not yet time to declare the end of the fight against inflation, European Central Bank President Christine Lagarde said Monday. "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," Lagarde said in a speech at a European Parliament hearing. "However, the medium-term outlook for inflation remains surrounded by considerable uncertainty."
The ECB chief pointed out that the bank's indicator of domestic inflation has not eased much, signaling that "inflation is now driven more by domestic sources than by external sources."
Wage pressures remain strong, which is mainly due to "catch-up" effects related to past inflation rather than a self-fulfilling dynamic, Lagarde said. The ECB expects wages to continue to be a key factor driving domestic inflation.
"This is not the time to start declaring victory," Lagarde said.
"We need to remain attentive to the different forces affecting inflation and firmly focused on our mandate of price stability."
The ECB expects the euro area economy to remain weak for the rest of the year. Lagarde also said there were some signs that job growth may lose momentum towards the end of the year.
"While the short-term outlook remains subdued, the economy is set to strengthen again over the coming years as inflation falls further, household real incomes recover and the demand for euro area exports picks up," Lagarde said.
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