Lagarde: ECB to zoom in on inflation expectations

The European Central Bank is closely watching inflation expectations and wage developments as predicting the length of disruptions caused the economy’s post-pandemic reopening is difficult, ECB President Christine Lagarde said.

“We should not overreact to supply shortages or rising energy prices, as our monetary policy cannot directly affect those phenomena”, Lagarde said in a speech.

“But we will pay close attention to wage developments and inflation expectations to ensure that inflation expectations are anchored at 2%,”, she added.

Lagarde mentioned that she still expected these “frictions” to be transitory, repeating the bank’s long-standing line that the inflation spike will abate next year.

The ECB is highly interested in following up on inflation expectations to make sure it could remain stable near 2.00%.

Lagarde’s speech Tuesday follows the same tone on inflation during her last week’s virtual meeting with Jerome Powell, Chairman of the U. S. Federal Reserve Board. Both sides agreed that the sharp rise in inflation may continue for some time and is due to transitional causes.