MNI BRIEF: No Evidence Of 2nd Round Wage Effects - ECB Lagarde

Inflation will take longer to decline than originally anticipated, ECB president Christine Lagarde said Monday, but will moderate next year as energy prices ease in the first half of 2022, and as the unwinding of supply bottlenecks helps price pressures on goods and services normalise.

Adjusting HICP to include owner-occupied housing would have added around 0.2% to Q2 2021's inflation print, Lagarde said. Inflation is expected to be below the ECB's symmetric 2% in 2023, however, with rate hikes next year "very unlikely."

"If energy prices keep rising or supply constraints persist, inflation may remain higher for longer than we currently anticipate," she said. "This could feed into higher wages and subsequently higher prices. But so far, we see no evidence of this in the data for negotiated wages. We do see wage growth next year potentially rising somewhat more than this year, but the risk of second-round effects remains limited."