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Lagarde says ECB stays on the middle path after 25bp rate hike
ECB President Christine Lagarde cited August inflation data, with energy inflation accelerating to 14.3% from 10.3%, while services-side measures excluding energy and food eased to 2.4%.
ECB President Christine Lagarde told the European Parliament in Brussels that the European Central Bank is staying on a “middle path” after raising interest rates by 25 basis points earlier this month. According to Action Forex, she argued the energy shock is too large to ignore, but the ECB has not yet seen evidence that it is embedded deeply enough to justify a more forceful response.
Lagarde said the ECB does not react to energy prices on their own, instead responding if it sees risks that higher energy costs become embedded in inflation. Action Forex reported she described the ECB’s stance as a “measured response,” citing inflation ahead without signs yet of broad embedding.
The latest inflation mix helped support that view, Lagarde said. Action Forex noted that headline inflation rose from 2.9% to 3.2% in August, driven largely by energy inflation increasing from 10.3% to 14.3%, while inflation excluding energy and food edged down to 2.4%.
Action Forex added that Lagarde pointed to wage dynamics, saying compensation per employee slowed from 3.6% to 3.3% in Q2 and wages have shown no material response to the energy shock so far. She said that has left the ECB focused more on whether the shock spreads through wages and underlying inflation than on the initial price surge.