FRANKFURT (Reuters) – The European Central Bank should continue to closely monitor developments in inflation expectations, which recently exceeded its 2% target, but in wages, one of the main determinants of the duration of the phases. inflationary inflation remains contained, said ECB Vice-President Luis de Guindos on Thursday.
Inflation in the euro zone reached 7.4% year on year in March, its highest level since the introduction of the single currency, and although it should fall in the coming months, more and more observers fear that it will remain permanently high and prevent the ECB from containing it around 2% in the years to come.
“In the medium term, most surveys and measures of inflation expectations based on market data indicate inflation rates around our target of 2%”, said Luis De Guindos during a hearing in the European Parliament .
“Inflation expectations have, however, increased in recent months and early signs of these measures moving beyond the target warrant close monitoring,” he added.
However, he clarified that there was no sign at this stage to suggest that the rise in consumer prices was favoring an acceleration in wage increases, which would constitute a worrying signal because it would suggest the triggering of a lasting inflationary dynamic.
“For now, wage increases are quite cautious and fully compatible with the objective of price stability,” said Luis De Guindos.
The ECB plans to continue “normalizing” its monetary policy, first by ending its purchases of bonds on the markets and then by considering raising its interest rates, he continued, taking up the speech made by the institution following its last meeting on 14 April.
This strategy could promote a rise in bond yields in the euro zone, but the ECB is ready to act to limit an unjustified widening of “spreads”, the differences in yields between the various member countries, underlined the Vice-President.
“We discussed the global implications of fragmentation,” he said. “We have not discussed concrete instruments (…) but I can assure you that we are ready to act.”
(Report Balazs Koranyi and Francesco Canepa, French version Marc Angrand, told by Kate Entringer and Jean-Michel Blot)