ECB President Christine Lagarde says euro zone inflation will stay elevated and that a December rate hike remains the expected direction. She stopped short of a firm commitment, and she is due to leave the post in February 2027.
Euro zone inflation will remain elevated over the coming quarters, European Central Bank President Christine Lagarde said, signaling that it would take significant changes to deter policymakers from raising interest rates again in December.
In an interview with Japanese newspaper Yomiuri Shimbun, Lagarde said price pressures are set to persist, while secondary inflation pass-through has so far developed within the central bank's expectations. According to Lagarde: "We know that inflation numbers will remain high in the quarters to come."
ECB held its deposit rate in October
The remarks follow the ECB's decision in late October to hold its benchmark deposit rate steady at 2.50%. Headline inflation across the 21-member currency bloc is running at double the central bank's 2% objective, fueled by the surge in crude and European natural gas prices since the eruption of the Middle East conflict.
Governing Council hawks have increasingly pushed for renewed tightening.
Wages and core inflation under watch
Core inflation held unchanged in October at 2.5%. Lagarde indicated that policymakers will scrutinize granular components before deciding whether to deliver a 25-basis-point hike next month, which would be the third rate increase of the current cycle.
The ECB chief noted that wage metrics have not yet triggered an alarming upward spiral. She said the bank is watching multi-year wage agreements and companies' wage expectations and does not see evidence of a shift yet.
December decision and a leadership change
Still, Lagarde reiterated that the bias remains toward tighter policy. She said she could not tell anyone that the ECB will for sure raise rates in December, but that it would take significant changes for the direction of travel to differ from what she expects.
The decision coincides with a leadership transition. Lagarde, 70, announced last month that she will step down in February 2027, nine months before the formal end of her term. The Eurogroup confirmed on Friday that Dutch central bank chief Klaas Knot and former Bank of Spain Governor Pablo Hernández de Cos have emerged as the leading candidates to succeed her.
Source: Investing.com
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