In March inflation in the euro zone was 6.9%.
ECB President Christine Lagarde said Thursday that inflation in the euro zone is too high and that the central bank should strive to bring this indicator to the 2% target, during a press conference at the elite French school. Polytechnic of Paris.
Some of the ECB’s 26 currency officials expressed doubts about what they called “immaculate disinflation,” according to ECB minutes from the March 15-16 meeting.
Some members argued that there was only a slim chance that inflation would return to low levels as quickly as suggested by the ECB staff’s March projections, which gave the impression of “immaculate disinflation” (i.e. a return of inflation to the target at very low cost in terms of lost production),” the ECB said in its minutes.
“Several members” of the Governing Council considered that the risks to the inflation outlook “were on the upside over the entire horizon.”
The ECB raised interest rates by 50 basis points at that meeting but said the outlook was too uncertain to commit to more as the crisis engulfed one of the world’s biggest banks, Credit Suisse.
ECB chief economist Philip Lane said this week that financial tensions have since eased, meaning a rate hike is likely at the next ECB meeting on May 3-4.
Some sources told Reuters that the ECB’s seventh consecutive hike would likely be smaller than previous ones, at just 25 basis points, due to continued uncertainty over the financial sector and the lagged effects of past funding cost hikes.
Some of Lane’s colleagues openly questioned the forecasts he presented at the meeting, including for average wage growth of 5.3% this year, before declining to 4.4% next year and 3.6% in 2025.
“There were questions about whether the lower wage growth expected towards the end of the horizon in the March projections was justified,” the ECB said.
Others argued that it was consistent to revise nominal wage growth downward while cutting inflation forecasts.
