European Central Bank President Christine Lagarde addresses the European Parliament's Committee on Economic and Monetary Affairs, in Brussels, on March 20.JOHANNA GERON/Reuters
Euro zone inflation pressures are easing as expected but wage growth is still strong and the outlook is especially uncertain, so the European Central Bank’s fight to contain price growth is not yet done, ECB President Christine Lagarde said on Monday.
The ECB lifted rates to a record high 4 per cent earlier this year to stop price growth but has signalled steady policy for the next few quarters and markets have started to position for the first rate cut, with a move seen as soon as April or June.
“This is not the time to start declaring victory,” Lagarde told a meeting of EU lawmakers in Brussels. “We need to remain attentive to the different forces affecting inflation and firmly focused on our mandate of price stability.”
Lagarde said she expected the weakening of inflationary pressures to continue but overall price growth could accelerate in the coming months and the medium-term outlook is surrounded by “considerable uncertainty”.
High rates, weak growth and some softening of the jobs market will all help the ECB get inflation back down to 2 per cent, Lagarde argued.
But wage growth is still rapid, even if worker pay is just catching up, and the economy will strengthen in the coming years, she added.
On policy, Lagarde merely repeated the ECB’s standard guidance that current interest rates, maintained for “sufficiently long,” will help restore price stability.
She added that new staff projections due in December, which will for the first time include figures for 2026, will also be key.