The president of the European Central Bank (ECB) assured this Monday that inflation shows signs of moderation in August. Data from the European Statistical Office (Eurostat) show that prices fell by 5.2% last month. The rate, although it is still far from the 2% objective set by the ECB, is half of what it set in October 2022. «Core inflation is also on the path of decline and fell to 5.3% in August,» Lagarde emphasized in the his appearance before the Economic Affairs Committee of the European Parliament.
The institution raised interest rates again in September from 4.25% to 4.5% and Lagarde emphasized that they are at a level that “if maintained for a long time, will contribute significantly to the return of inflation to the goal set by ECB ». The Eurobank will continue to make monetary decisions based on the data available to it and “underlying inflation is an important decision-making factor,” said Lagarde. With the current data, prices are expected to be within 2% “at the end of 2025.” According to the ECB’s projections, inflation will close the year at 5.6%, before decreasing to 3.2% in 2024 and 2.1% in 2025.
The rate hike also contributed to curbing consumption and cooling the European economy. Economic activity stagnated at the beginning of 2023 and the ECB indicators show that it will “continue weakening” in the third quarter of the year. The fall in exports and the tightening of financial conditions have an impact on the countries of the euro. Despite everything, the labor market remained strong and unemployment remained at a historic low of 6.4% in July.
Job creation also slowed as the Eurozone lost momentum. “Looking to the future, that ‘momentum’ will return as consumption grows,” Lagarde emphasized. The ECB’s latest forecasts suggest that countries in the common currency will grow by 0.7% in 2023 and rebound to 1% and 1.5% in 2024 and 2025, respectively.