Christine Lagarde, President of the European Central Bank (ECB), addressed the ECB and Its Watchers XXIV conference in Frankfurt on Wednesday. She emphasized expectations for a continuation of disinflationary trends, highlighting the importance of accommodating rising demand and maximizing labor resources to boost productivity growth.
Key Points from Lagarde’s Speech:
- Emphasis on moving further along the disinflationary path.
- Noted that compression of profit margins has allowed wages to catch up without fueling inflation.
- Average wage growth for existing contracts in 2024 decreased from 4.4% to 4.2% between January and March.
- Lagarde stressed the need to act based on available data, rather than waiting for all information to become available.
- Expressed expectations for important evidence in the coming months, which could increase confidence for a policy adjustment.
- Indicated that recent data suggest wages are growing in line with inflation expectations.
- Lagarde mentioned the difficulty in assessing whether price pressures indicate persistent inflationary trends or are temporary.
- Despite uncertainties, Lagarde mentioned reasons to believe that disinflationary trends will continue.
- If upcoming data align with inflation projections, it could signal a transition to adjusting policy.
Market Reaction:
- The EUR/USD currency pair did not immediately respond to Lagarde’s comments and was observed to be down 0.15% for the day, trading at 1.0850.