ECB President Christine Lagarde said euro-area inflation remains well above target and that the energy-driven shock is lasting longer than expected, in an Ouest-France interview on the ECB website Sept 12.
“We have an inflation target of 2% over the medium term. Today, inflation is well above 2%, at 3.3% in the euro area, and there has been a major shock that will probably last longer than we had expected,” Lagarde said in the ECB transcript.
She tied the shock to Middle East conflict and refining destruction worldwide, especially in Russia, saying higher energy costs drive prices higher and a resilient economy obliged the ECB to react. On looking through shocks: “But the current shock is longer-lasting. The conflict is continuing. We expect the volatility and pressure on energy prices to continue, even though the increase in prices also poses a risk of lower growth.”
The interview followed Thursday’s ECB rate increase. Peer desks put the deposit rate at 2.5% after that move.
Sources: ECB interview with Ouest-France Sept 12 (Christine Lagarde transcript; inflation 3.3%; longer-lasting shock; Middle East conflict; Russia refining; obliged to react; growth risk); Bloomberg Sept 12 (wire pickup of longer-lasting shock); The Edge Malaysia Sept 13 Bloomberg syndication (peer deposit 2.5% / further-hike familiar color).
