European Central Bank (ECB) President Christine Lagarde said that the central bank is closely analyzing recent inflation data and stands ready to take appropriate action if signs of sustained "second-round" inflation emerge.
Speaking in an interview with China Media Group on Wednesday on the sidelines of the G20 Finance Ministers and Central Bank Governors meeting in Bangkok, Thailand, Lagarde addressed mounting concerns over the Eurozone's economic outlook.
In September, Eurozone inflation jumped to a three-year high of 3.8 percent, significantly exceeding market expectations. Lagarde noted that a substantial portion of this spike was driven directly by energy prices, which surged 18.8 percent.
"A large portion of it is attributable to energy. Energy prices went up by 18.8 percent. That has an impact on overall prices. What I'm particularly concerned about is that it's going to travel throughout the economy and have what we call the 'second-round effect', meaning workers will be asking for much higher wages, which will then translate back into higher inflation and prices, because demand will be fueling those prices. We are not seeing that. We are particularly attentive to hints -- little signals that this is coming, but we're not seeing it for the moment," said Lagarde.
When asked whether the current rise in inflation would pressure the ECB to tighten monetary policy in the coming months, Lagarde maintained a cautious but confident stance.
"The second thing that I'm very attentive to is inflation expectations. If we see that inflation expectations in the medium-to-long term were to move up from where it is at the moment, or if we saw clear signals that second-round inflation would develop, then that would require action. For the moment, we believe that we are well-positioned," said Lagarde.
Lagarde also addressed recent speculation regarding her future, emphasizing that her current focus is on maintaining price stability and making the right decisions as ECB president.
"What I can tell you is that I am 100 percent president of the ECB, focused on my work, focused on my job, focused on the collective endeavor that we have, which is to maintain price stability and to make the right decisions. That's what I'm doing day in, day out, OK? When do I go? As I said, 'it will be in 2027', but I will announce in due course with appropriate notice. Everybody will know about it," she said.
European Central Bank to take appropriate action if inflation worsens: Lagarde
