Ahmed Ali According to Christine Lagarde, President of the European Central Bank (ECB), inflation in the eurozone is showing a downward trend but is anticipated to remain above the target for the next two years. Lagarde emphasized the need for the ECB to take further action to reduce inflation, despite consumers’ expectations of stable price increases during this period.
Lagarde’s Comments on Eurozone Inflation and Medium-Term Target
In a recent interview published by the ECB, Lagarde stated that eurozone inflation has been decreasing. It has dropped from double-digit figures experienced in early fall 2022 to 5.5% for the entire euro area in June.
Lagarde explained that the decline is primarily attributed to lower commodity and energy prices, while also acknowledging that the ECB’s monetary policy decisions have influenced prices.
However, when asked if inflation is finally under control, Lagarde pointed out that it still remains higher than the medium-term target of 2%. According to the ECB’s staff projections, it is expected to persist in exceeding the target in 2024 and 2025. She emphasized the ongoing work required to bring it back down and reach the desired target.
ECB Consumer Expectations Survey Results and Lagarde’s Statements
Lagarde’s remarks coincided with the release of the ECB’s latest Consumer Expectations Survey. The study revealed a decrease in inflation expectations for the next 12 months, while expectations for inflation over the next three years remained stable.
According to the report, the perceived inflation rate over the previous 12 months decreased to 8.0% in May 2023, compared to 8.9% in April. Median expectations for inflation over the next 12 months also decreased to 3.9%, down from 4.1% in April. Expectations for inflation three years ahead remained unchanged at 2.5%.
Additionally, the ECB highlighted a slight increase in consumer expectations for nominal income growth over the next 12 months. However, expectations for nominal spending growth continued to decline.
Lagarde’s Perspective on Profit Margins, Wages, and Inflation
During the interview, Lagarde mentioned that profit margins have not decreased during the period of high inflation. In some cases, they have even increased. She stated that it is up to companies to decide whether to meet employees’ expectations and restore some purchasing power. However, she cautioned that simultaneous increases in both profits and wages could fuel inflation. Lagarde stressed that the ECB would not remain passive in the face of such risks.
Share Your Expectations on Eurozone Inflation
What are your expectations regarding inflation in the eurozone over the next two to three years? Feel free to share your thoughts in the comments section below.
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Frequently Asked Questions (FAQs) about Eurozone inflation
Q: What is the current status of inflation in the eurozone?
A: Inflation in the eurozone has started to decline but remains above the target set by the European Central Bank (ECB). It dropped from double-digit figures to 5.5% for the entire area in June. However, it is still higher than the medium-term target of 2%.
Q: Will inflation in the eurozone reach the ECB’s target in the next two to three years?
A: According to ECB President Christine Lagarde, inflation is projected to remain above the target in 2024 and 2025 based on staff projections. Therefore, it is unlikely to reach the 2% target in the next two to three years.
Q: What actions does the ECB plan to take regarding inflation?
A: Lagarde acknowledges the need for the ECB to do more to bring inflation down. While stable consumer expectations exist, further action is necessary to reduce inflation and reach the target. The ECB’s monetary policy decisions will play a role in addressing inflationary pressures.
Q: How do consumer expectations relate to inflation?
A: The latest Consumer Expectations Survey results show that inflation expectations for the next 12 months have decreased, while expectations for inflation over the next three years have remained stable. This suggests that consumers anticipate relatively stable price increases in the near term.
Q: What is Lagarde’s perspective on profit margins and wages in relation to inflation?
A: Lagarde notes that profit margins have not decreased during the recent period of high inflation and, in some cases, have even increased. She leaves it to companies to decide whether to meet employees’ expectations and restore purchasing power. However, she warns that simultaneous increases in both profits and wages could fuel inflation, and the ECB would not remain passive in such circumstances.
More about Eurozone inflation
- Eurozone Inflation to Remain Higher Than 2% Target in Next 2 Years, ECB’s Lagarde Admits – Bloomberg article providing insights on Eurozone inflation and Lagarde’s comments.
- European Central Bank – Official website of the European Central Bank, offering information on monetary policy and inflation targets.
- Consumer Expectations Survey – ECB’s official page providing access to the latest Consumer Expectations Survey results and reports.
- La Provence – French daily newspaper where Lagarde’s interview was conducted.
8 comments
Inflation in eurozone remains above target, Lagarde urges ECB action, consumer expectations stable, target unmet.
Lagarde admits eurozone inflation above target, calls for more ECB action, consumer expectations stable but work ahead.
Eurozone inflation remains high, Lagarde wants more ECB action, stable consumer expectations, target not met.
Eurozone inflation higher than target, Lagarde calls for more ECB measures, stable consumer expectations, target elusive.
Lagarde: eurozone inflation down, but still above target, ECB must act, stable consumer expectations, work to be done.
Lagarde sees eurozone inflation decline, but still above target, ECB urged to act, stable consumer expectations.
inflation in eurozone stays up, Lagarde says more to do, consumer expect stable prices, target not met!
Eurozone inflation high, Lagarde wants ECB action, consumer expectations stable, work needed for target.