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MNI BRIEF: Two-Way Inflation Risk, Growth To Downside- Lagarde

(MNI) London

Upside inflation risks persist from geopolitical factors including Middle-East tensions but there are also downside risks should monetary policy dampen activity more than anticipated, ECB President Christine Lagarde said Thursday, adding that risks to growth tilt to the downside.

Growth could be stronger than expected if inflation falls faster than forecast, Lagarde added. (See MNI INTERVIEW: ECB Inflation Sceptics Hold Upper Hand-Scicluna)

Thursday's ECB statement again noted that while "most measures of underlying inflation have eased further, domestic price pressures remain high", in part due to wages growth. Financing conditions are restrictive and "past interest rate increases continue to weigh on demand, which is helping push down inflation.”

Eurosystem projections showed inflation at 2.3% in 2024, 2.0% in 2025 and 1.9% in 2026. Growth is seen at 0.6% this year, before accelerating to 1.5% and 1.6% in 2025 and 2026. Rate decisions will remain data dependent and keep policy appropriately restrictive, Lagarde added.

MNI London Bureau | +44 203-865-3812 |
MNI London Bureau | +44 203-865-3812 |

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