ECB’s Lagarde sees no clear evidence core inflation has peaked

IT’S not yet apparent that core inflation has peaked in the eurozone, European Central Bank President Christine Lagarde said, pledging further increases in borrowing costs.

“There is no clear evidence that underlying inflation has peaked,” Lagarde said on Thursday (Jun 1) in a speech in Hanover, Germany. “We have made clear that we still have ground to cover to bring interest rates to sufficiently restrictive levels.”

Lagarde spoke shortly after data showed inflation in the 20-nation eurozone slowed markedly last month – reinforcing the idea that the toughest monetary-tightening campaign of the euro era can soon draw to a close.

Core price pressures, however, moderated by less, meaning there’s probably still at least one more hike to come to ensure the 2 per cent inflation target is reached.

Speaking on Wednesday, ECB Vice President Luis de Guindos “could not say that the victory is there so far.” Fellow rate-setter Madis Muller said more than one additional quarter-point rate move is likely.

Lagarde said officials aren’t satisfied with the inflation outlook but that monetary policy is being transmitted “forcefully” to credit, with the action taken to date to still have a significant impact.

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ECB has more ground to cover to tame inflation: Lagarde

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“These hikes are already feeding forcefully into bank lending conditions,” she said. “And we know that – having hiked so far and so fast – considerable tightening is still in the pipeline.” BLOOMBERG