ECB faces high underlying inflation in short term, says Lagarde

FRANKFURT, March 6 (Reuters) – Core inflation in the euro zone will remain elevated in the near term, making a 50 basis point rate hike by the European Central Bank increasingly certain at the end of this month. , as ECB President Christine Lagarde told Spanish media group Vocento.

The ECB has already raised rates by 3 percentage points since July and essentially promised another hike of half a percentage point on March 16, but investors have recently speculated an even higher hike given the poor data. on inflation.

Lagarde said the predicted hike is now “very likely”, but also warned that core inflation, which excludes volatile food and fuel prices, could remain uncomfortably high even if the headline inflation rate declines. In the coming months.

“In the short term, underlying inflation is going to be high,” Lagarde said on Sunday, according to Grupo Vocento.

Several policymakers have recently warned that ECB rate hikes should continue until core inflation picks up and starts to decline towards the ECB’s 2% target.

Core inflation rose last month to a record high of 5.6% and some monetary leaders fear the rise is now due to a rebound in service-sector wages, making price growth more durable and hard to stop.

“We must continue to take all necessary measures to bring inflation down to 2%. And we will,” Lagarde said.

He added that the eurozone economy is holding up better than expected and production is expected to pick up after near stagnation in the last quarter of 2022.

(Reporting by Balazs Koranyi; editing by Jonathan Oatis, editing in Spanish by José Muñoz at the Gdansk newsroom)