Lagarde Speech: ECB must stop quick wage growth from fuelling inflation

Euro zone wages are growing quicker than earlier thought and the European Central Bank must prevent this from adding to already high inflation, ECB President Christine Lagarde told a Croatian newspaper on Saturday, reported Reuters.

ECB’s Lagarde provided no new policy hint in the interview but said the bank must "take the necessary measures" to lower inflation to 2% from its current rate of near 10%, per Reuters.

Key quotes

We know wages are increasing, probably at a faster pace than expected.

We must not allow inflationary expectations to become de-anchored or wages to have an inflationary effect.

We need to be careful that the domestic causes that we are seeing, which are mainly related to fiscal measures and wage dynamics, do not lead to inflation becoming entrenched.

Bloc's expected winter recession, induced by soaring energy costs, is likely to be short and shallow, provided there are no additional shocks.

Market implications

The news should help EUR/USD to remain firmer considering the Federal Reserve’s (Fed) comparatively dovish bias.

Also read: EUR/USD Price Forecast 2023: Control inflation or avoid recession? Is there a recipe for success?