Lagarde: Not Yet Enough Information To Assess Profit Impact On Inflation

The Lagarde press conference concludes with Q: The German government has passed a savings package that includes a higher carbon tax. To what extent will this affect eurozone inflation? The main driver for the stubborn inflation in the coming months will be wages and profits. Does this mean there is still some risk of a wage-price spiral?

• A: It's obviously premature. The German coalition decision came yesterday. We have not figured those numbers into our current projection. We obviously will do so and try to understand its impact.
• A: We have seen a contribution from profit to inflation declining over the course of 2023. If that is confirmed (it is a big ‘if’) it means the hypotheticals in our forecast that markups would be reduced to absorb increased wages, then that is actually taking place. This would be really good news for inflation. But we don’t have enough information to show that this will happen.