Inflation warning from ECB President Lagarde

European Central Bank (ECB) President Christine Lagarde stated that inflation figures will continue to remain high in the coming quarters and said that the longer interest rates remain high, the greater the risk to medium-term targets.

Verified Details and Technical Data of the News

European Central Bank (ECB) President Christine Lagarde made evaluations about monetary policy in her interview with the Japanese newspaper Yomiuri Shimbun published on Saturday. Lagarde shared her assessment: "We know that inflation figures will remain high in the coming quarters. The higher these figures are and the longer they remain high, the greater the risk to our medium-term goal."

Stating that although core inflation remained stable at 2.5%, a relatively low level on a monthly basis in October, the ECB will examine detailed breakdowns to determine the steps it will take regarding interest rates next month, Lagarde also spoke about the second round effects.

Lagarde said that for now the central bank does not see second-round inflation impacts "beyond what is included in its forecasts." Emphasizing that they carefully monitor forward-looking indicators, multi-year wage agreements and companies' wage expectations, Lagarde added that they have not yet seen evidence of a shift.

Eurozone headline inflation remains at twice the ECB's 2% target and the economy continues to grow robustly; Several policymakers have signaled that a new quarter-point rise in interest rates is likely next month, following two steps taken since the Iran war sent energy costs skyrocketing. However, the main question centers on how much further tightening the 21-member monetary union bloc can withstand without harming economic growth. Another rate hike would push borrowing costs to the upper end of the range where their economic impact is considered harmless. The recent jump in global bond yields presents another headwind.

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