FRANKFURT (Reuters) – Several measures of core inflation in the euro zone have exceeded the European Central Bank’s (ECB) 2% target and the ECB is closely monitoring developments in inflation expectations, said said Thursday its president, Christine Lagarde.
Upside risks surrounding the inflation outlook have increased, especially in the near term, she added at an online news conference.
Inflation in the euro zone reached 7.5% in March, its highest level since the creation of the single currency, and it could accelerate further for several months, the war in Ukraine favoring the increase in the prices of energy and food products.
“Measures of underlying inflation have risen to levels above 2% in recent months,” said Christine Lagarde, adding that the duration of this situation remained uncertain.
“While various measures of longer-term inflation expectations derived from financial markets and expert surveys are moving around 2%, early signs of revisions in these measures above target warrant that they be monitored,” she added.
While the recent acceleration in inflation is largely explained by the external shock caused by the war in Ukraine, it should ease over time, especially as wage growth remains contained.
But longer-term inflation expectations have started to move upwards, which raises fears of their “unanchoring”, a phenomenon feared by central banks because it implies a deterioration in their credibility.
“The last thing we want is to see inflation expectations threatened with unanchoring,” said Christine Lagarde.
(Report Balazs Koranyi, French version Marc Angrand)
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