Lagarde: How do wages keep inflation high?

European Central Bank President Christine Lagarde said core inflation in the euro zone remains strong and wage growth is “historically high.”

Speaking at the International Monetary Fund meeting in Marrakesh, the ECB president largely reiterated her assessment of the economy last month, while emphasizing that progress was still needed in tackling consumer prices.

“Wage growth is expected to decline gradually.”

According to Bloomberg, Lagarde stressed that “core inflation remains at high levels, reflecting the fact that the weak impact of previous increases in input costs is offset by higher labor costs.”

“In fact, workers’ demands to compensate for lost purchasing power amid tight labor markets have led to historically high wage growth,” he added.

Target 2%

He noted that inflation should slow to a 2% target in 2025, reiterating officials’ expectations at the September 14 meeting. This meeting led to a decision to raise interest rates for the tenth time in a row, with a commitment to keeping them high.

“Wage growth is expected to moderate gradually, although it will remain high over the forecast horizon, driven by minimum wage increases and compensation for inflation in the context of tight, albeit cool, labor markets,” the ECB President said. Bank.

“Growth could be slower if the effects of monetary policy prove stronger than expected or if the global economy becomes weaker and geopolitical risks intensify. Growth could also be higher than expected if a strong labor market, rising real incomes and easing uncertainty boost confidence among consumers,” he added. And companies push them to spend more.

source: Ot.gr