Inflation is going down this year in the euro zone, recognizes the European Central Bank (ECB), but will remain above the 2% target. But the evolution of salaries can be an extra pressure factor, disrupting the trend. To know if it is really happening or not, key data is missing, which will help the entity to finish deciding the future of the types. Without clear deadlines, patience before any measure.
This was stated this Thursday by the president of the entity, Christine Lagarde, who is committed to being cautious before defining the first rate reduction after the cycle of increases. Despite dropping on previous occasions that the cut could arrive in the summer, she now prefers caution because the fear is to promote a premature change of course.
In an intervention before the Economic Affairs Committee of the European Parliament, the banker, who had recently suggested that the reduction could arrive in the summer, refused to talk about dates. Inflation falls, but clarity is lacking. “We are confident that we are heading towards the 2% target in the medium term, but we need to be more confident. We still do not have enough evidence to be sure that (the trend) is sustainable and not risk its reversal,” he said. warned. In January, prices rose 2.8% year-on-year in the eurozone.
The main fear is that wages are accelerating more than expected and fueling a higher increase in prices, disrupting any decline. As other items such as food or energy have declined, “wage growth remains strong and is expected to become an increasingly important driver of inflation dynamics in the coming quarters.” Here Lagarde has defended his policy before MEPs, with the general rate at 4.5%, which contributes “to ensuring that inflation returns to the 2% objective in the medium term.”
To confirm this, the Frenchwoman has reiterated that it is necessary to wait for more data to be published on the evolution of salaries. Especially due to the negotiations underway in the first quarter to finish defining a change in monetary policy. Logic would suggest that after stabilizing in the last part of 2023, the payroll review should be moderated.
“We will continue with a data-dependent approach to determine the appropriate level and duration of (monetary) tightening, taking into account the inflation outlook, underlying inflation dynamics and the strength of monetary policy transmission,” has summarized.
