MNI BRIEF: ECB Patient But Alert To Inflation Risks - Lagarde

The ECB will not hesitate to raise interest rates if key conditions are met, Christine Lagarde said Friday, with March’s Eurosystem staff growth and inflation projections possibly requiring a fresh look at the "roadmap".

So far there is little evidence of long-term second round effects such as wage increases, leading to sustained inflation, Lagarde told an online audience at Davos, with many of the temporary factors currently putting upward pressure on prices still expected to fade. But should the Governing Council’s three criteria for withdrawing monetary support be met, “we have to act [but] we are not there yet,” she said. That process has already begun with the March end net purchases under PEPP, she said, “and we know which sequence to proceed in.”

Recent inflation surges have outstripped the ECB's own expectations from earlier in the pandemic, she conceded. Monetary policymakers should therefore stay "humble," she said, while remaining data-dependent, state-dependent and above all patient in addressing average euro area inflation.