Rapid wage growth in EU will cause inflation to rise-Lagarde
2022.12.31 02:37
Rapid wage growth in EU will cause inflation to rise-Lagarde
Budrigannews.com – According to an interview with a Croatian newspaper, ECB President Christine Lagarde, wages in the Eurozone are rising faster than previously thought, and the European Central Bank needs to make sure that this doesn’t raise already high inflation.
In an effort to stem a historic surge in inflation, the European Central Bank (ECB) has increased interest rates by 2.5 percentage points since July. In light of the fact that longer-term price growth expectations have begun to rise above the 2% target, the ECB has promised even more policy tightening at its subsequent meetings.
Lagarde was quoted as saying on Saturday by Croatian newspaper Jutarnji list, “We know wages are increasing, probably at a faster pace than expected.” We must prevent wage inflation and inflationary expectations from becoming unanchored.
In the interview, Lagarde said that the bank must “take the necessary measures” to bring inflation down to 2% from its current rate of close to 10%. She did not offer any new policy suggestions.
Croatia will become the 20th member of the euro zone on January 1st. It will join an elite club at a time when the ECB is trying to control inflation after spending a decade unleashing unprecedented stimulus to rekindle price growth when it was extremely low.
Lagarde stated, “We need to be careful that the domestic causes that we are seeing, which are primarily related to fiscal measures and wage dynamics, do not lead to inflation becoming entrenched.” These domestic causes are primarily related to inflation.
Lagarde added that, provided there are no additional shocks, the bloc’s anticipated winter recession, triggered by rising energy costs, is likely to be brief and shallow.
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