ECB’s Lagarde says inflation expectations still anchored

European Central Bank (ECB) President Christine Lagarde stated Friday that long-term inflation expectations across the euro area stay largely well-anchored, even as the ongoing energy shock from Middle East tensions continues to drive up prices and drag on economic activity.

Briefing after Eurogroup meeting

Speaking to reporters following a Eurogroup meeting of eurozone finance ministers held in the Greek Cypriot Administration, Lagarde emphasized the ECB’s firm commitment to price stability amid high uncertainty. She briefed ministers on eurozone economic activity, recent inflation trends, and the monetary policy decision taken by the ECB in April.

Energy shock’s dual effect

Lagarde noted that the energy crisis is producing significant direct and indirect effects on EU economies. While long-term inflation expectations remain anchored, she acknowledged upward pressure on inflation and downward pressure on growth. “The implications for medium-term inflation and economic activity will depend on the intensity and duration of the energy price shock, as well as the scale of its indirect effects,” she said.

Data-dependent approach ahead

When asked about the ECB’s next monetary policy meeting scheduled for June 11, Lagarde avoided giving a clear signal, reiterating that the bank will follow a “data-dependent and meeting-by-meeting approach” to deliver on its 2% medium-term inflation target. She also urged that fiscal measures addressing the energy-price shock should be temporary, targeted, and proportionate.