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Lagarde: For Pause, Need To Be Confident Inflation To Hit + Stay At 2%

ECB
Q: What do you need to see from core inflation in order to pause in September? What is enough when it comes to tight financial conditions?
  • A: Wish I could give simple answer, but unfortunately it doesn't work like that. We know the target is 2% in the medium-term added to which we need to be confident it will stay at 2% which is why duration matters as well. Is a matter of the 3 elements:
    • 1) Inflation outlook
    • 2) underlying inflation and the dynamics of it. Look at multiple cuts of inflation including the "corest of the core" and a whole variety of prices and inflation, need to be confident that is heading down. Have some of those coming down, some stable, some still going strongly
    • 3) Strength of transmission. Market prices, bond prices, credit by banks, bond pricing, and then to the economy e.g. Loans to corp/households and ultimately to inflation. That's what we have done, what we will do and we will stick to that methodology
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