Lagarde Highlights Differences In UK And Euro Inflation, Labor Mkt

Q: Given the BoE decision to raise rates, what is the difference between the UK and Eurozone inflation numbers? Why does the ECB not take the same course of action as the BoE. What can you tell us about wage growth in the eurozone? Are you worried about it?

• A: The UK has a history of much higher inflation than in the euro area. The critical difference between the respective economies has to do with the labour market. There is a lot of pressure on wages where there is a scarcity of workers [in the UK]. There as a large non-UK labour force that left the UK and was not fully replaced.
• The euro area is at the lowest unemployment it has ever seen. Participation in the labour market is back to pre-pandemic levels. What we are not yet seeing is a significant movement in wage increases. We are not seeing a lot with respect to wage negotiations. The March and June meetings will be critical to determine whether the inflation criteria are satisfied.