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Lagarde: Inflation "Undesirably High", Risks Primarily To Upside

ECB

Lagarde points out that the risks to inflation are primarily to the upside, due to a variety of risk factors:

  • Risks relating to the pandemic have declined, but the war is a downside risk to growth – particularly a further disruption to energy supplies in the euro area. If the war were to escalate, economic sentiment could worsen, supply side constraints could increase, and food and energy costs could remain persistently higher than expected.
  • The risks surrounding inflation are primarily on the upside.
  • The risks to the medium term inflation outlook include a worsening of the production capacity of the economy, inflation expectations rising above target, higher than anticipated wage rises and persistently high food and energy prices.
  • Inflation is undesirably high. We will make sure that inflation returns to our target over the medium term.

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