“We expect inflation in the medium term to stabilize below our objective,” the European Central Bank (ECB) President Christine Lagarde said in an Interview with La Provence on Friday.
Key quotes
“Our inflation projections for this year are around the 2% mark – which is something we haven’t seen in more than eight years.”
“The increase in prices should nevertheless slow to 1.5% in 2022 and 1.4% in 2023. “
“The double monetary lever applied by the ECB and the fiscal policies pursued by the governments and the European Union are fuelling the recovery. We observe a price increase which is notably driven by two base effects. “
“The first relates to petrol prices, which collapsed to less than USD 25 per barrel during the pandemic before climbing back up to around USD 75 per barrel currently.”
“The second base effect concerns Germany, where the rate of VAT, which had been lowered last year to support the recovery, was restored on 1 January 2021. “
“However, these base effects will not last. We will see a return to lower rates of inflation as indicated in our projections.”
“Prices need to increase in a gradual, stable and sustainable manner. “
“For that we need a sustainable economic recovery. But we are not there yet.”
Market reaction
Despite the conciliatory remarks from the ECB Chief Lagarde on inflation, the euro remains unimpressed.
EUR/USD drops to fresh three-month lows of 1.1827, as the US dollar catches a fresh bid ahead of the key US NFP data. The pair is down 0.17% on the day.
