European Central Bank President Christine Lagarde has signaled that inflation will remain elevated in the coming quarters, posing a threat to the bank's medium-term objectives. In an interview published Saturday, Lagarde emphasized that higher and more persistent inflation readings could complicate the ECB's efforts to stabilize prices. She noted that the bank will closely examine the detailed October inflation breakdown before deciding on its next rate move in December.
Core inflation in October held steady at 2.5% from September, while headline inflation remains roughly double the ECB's 2% target. Officials are considering another 25-basis-point rate hike in December, following two previous increases driven by the Iran war's impact on energy prices. Lagarde cautioned that any decision will depend on new data, stating, 'I cannot tell you today that we will for sure do this in December.' She also highlighted that the ECB is monitoring forward-looking indicators, such as multi-year wage agreements and companies' wage expectations, without seeing evidence of a significant shift yet.
Lagarde, who announced last month that she will step down in February, has been succeeded by Dutchman Klaas Knot and Spain's Pablo Hernandez de Cos as potential candidates. She also addressed France's 2027 presidential race, stating that she will not remain silent if a leading candidate proposes 'that sovereign debt should be burnt.' The ECB's data-dependent approach into December will focus on wages and inflation breakdowns, with rate-sensitive assets and euro credit reacting to potential policy adjustments.