Inflation Is Proving Persistent as It Moves Through the Eurozone Economy
The nature of the inflation problem in the eurozone is changing, and interest rates will need to be higher for longer than policymakers and investors once estimated, Christine Lagarde, the president of the European Central Bank, said on Tuesday.
While the shocks that pushed the region’s inflation rate above 10 percent late last year, such as supply chain bottlenecks during the pandemic and the surge in energy prices after Russia’s invasion of Ukraine, have started to wane, their impact is still passing through the economy. That’s making inflation more persistent, Ms. Lagarde said at the central bank’s 10th annual conference in Sintra, Portugal.
The slower decline in inflation “is caused by the fact that inflation is working its way through the economy in phases, as different economic agents try to pass the costs on to each other,” Ms. Lagarde said. Companies have passed on costs to customers, and now workers are trying to catch up from lost wages caused by high prices.
Central bankers from across Europe and further afield, from Canada to South Africa, including Chair Jerome H. Powell of the Federal Reserve and Andrew Bailey, governor of the Bank of England, have gathered in Sintra at a challenging time for policymakers as they battle to bring inflation down without causing unnecessary economic pain.
Source: The New York Times
