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The current spike in inflation is unlikely to last, European Central Bank President Christine Lagarde said, while vowing to continue aiding the euro-area economy as the fallout from the pandemic lingers.
“Inflation is largely transitory,” Lagarde said on Saturday after delivering the 2021 Per Jacobsson Lecture at the International Monetary Fund. The ECB is paying “very close attention” to wage negotiations and other potential second-round effects that could drive prices higher more permanently, se said.
Euro-area consumer prices rose 3.4% in September, the highest rate in 13 years. The ECB predicts inflation will peak later this year before slowing down in 2022, with price growth projected to undershoot its target in the medium term.
“Monetary policy will continue supporting the economy in order to durably stabilize inflation at our 2% inflation target over the medium term,” Lagarde said. “The ECB is committed to preserving favorable financing conditions for all sectors of the economy over the pandemic period.”
The ECB rolled out a 1.85 trillion-euro ($2.15 trillion) emergency scheme to support the region during the Covid period. That program is due to end in March and the Frankfurt-based central bank is already preparing to transition to post-pandemic stimulus. It is studying a new bond-buying program to prevent any market turmoil once when crisis purchases end, officials familiar with the matter told Bloomberg last week.
“Once the pandemic emergency comes to an end -- which is drawing closer -- our forward guidance on rates as well as asset purchases will ensure that monetary policy remains supportive of the timely attainment of our target,” Lagarde said.
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