Europe knows nothing like ‘the great resignation’, says ECB’s Lagarde

Inflation in the euro zone is unlikely to reach the levels seen in the United States, European Central Bank President Christine Lagarde said on Friday.

Eurozone inflation levels have raised questions about the ECB’s monetary policy, with the central bank lagging its British and US counterparts on its normalization path.

Eurozone inflation hit a new high of 5% in December, mainly due to soaring energy prices in Europe.

Speaking via video conference at the World Economic Forum’s Davos Agenda event on Friday, Lagarde defended the ECB’s policy, saying Europe did not share the “state of excess demand” of the United States.

US demand is currently 30% above pre-pandemic levels, she said, while the euro zone is “roughly at pre-pandemic levels”.

“When I look at the job market, we’re not going through anything like the big quit, and our employment participation numbers are coming very close to pre-pandemic levels,” she told the event. moderated by CNBC.

“So I think those two factors, if you look at them carefully, are a clear indication that we’re not moving at the same speed, and we’re unlikely to see the same kind of increase in inflation that the US market is experiencing. knew.”

Millions of Americans have quit their jobs in recent months in search of higher wages and better working conditions. The movement has been widely dubbed “the Great Resignation”.

Core inflation – a measure that removes components vulnerable to volatility from the inflation figure – in the United States is 5.5%, Largarde added, compared to 2.6% in the euro zone.

“We have a direction towards the future which is quite solid,” Lagarde said. “And we will act – there is no doubt in my mind that once the criteria are met, we will. But at the moment they are not met.”

“Prices will stabilize”

Lagarde argued that Europeans had been “victims of our own success”, noting that advanced economies had seen a “breathtaking” recovery in demand that had outstripped supply. Challenges such as a lack of truck drivers and waiting ports have not helped ease the situation, she said.

However, with wage negotiations “not yet underway”, Lagarde said the ECB did not see a lasting movement in prices that could lead to “out of control” inflation.

“On the contrary, we assume for the moment that energy prices will stabilize over the course of 2022, and the bottlenecks will also stabilize, and gradually those inflation numbers will come down,” she told the panel.

But Lagarde noted that the ECB’s inflation outlook was subject to change.

“Once we complete our net asset purchases, we will look at other tools in the toolbox, including interest rate hikes,” she said.

Last month, the ECB announced that it would reduce its monthly asset purchases, but pledged to continue its unprecedented support for monetary policy until 2022.

Mary I. Bruner