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Lagarde: Attentive To 2nd Round Inflation Effects

ECB

Q: What can interest rates do when much of the inflation is imported?

  • A: A large portion of the inflation is attributable directly or indirectly to terms of trade.
  • We are clearly seeing an unprecedented 75% of inflation items being above 2%, which applies to services and non-energy industry goods.
  • We are very attentive to wages and second round effects. We are not seeing the risk of spiralling, but we are seeing a pickup in wages. We are aware Germany will implement the minimum wage as of October 1.

Q: Why do you not expect too much of a recession risk?

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Q: What can interest rates do when much of the inflation is imported?

  • A: A large portion of the inflation is attributable directly or indirectly to terms of trade.
  • We are clearly seeing an unprecedented 75% of inflation items being above 2%, which applies to services and non-energy industry goods.
  • We are very attentive to wages and second round effects. We are not seeing the risk of spiralling, but we are seeing a pickup in wages. We are aware Germany will implement the minimum wage as of October 1.

Q: Why do you not expect too much of a recession risk?

Keep reading...Show less