European Central Bank (ECB) President Christine Lagarde said Monday that prices in the eurozone remain under “strong pressure,” indicating that inflation excluding energy and food may not have peaked. During a hearing before the European Parliament, Lagarde noted that price pressures remain significant, despite a slowdown in year-on-year inflation in the euro area, which eased to 6.1% in May after reaching 7% in April. However, this is still far from the record 10.6% recorded in October.
Core inflation, which excludes energy and food, stood at 5.3%, down from 5.6% in April. According to Lagarde, inflationary pressure indicators, excluding energy and food, remain high according to the latest available data, and there is no clear evidence that core inflation has peaked. He also mentioned that wage pressures have increased in order to regain some of the purchasing power lost due to inflation.
The ECB is concerned about a possible wage-price spiral that could sustain inflation in the long run. In this context, the central bank could choose to raise interest rates, which is its preferred tool for restoring price stability. Over the past nine months, interest rates have risen by 3.75 percentage points. A further increase is expected in June, probably by 0.25 points, according to analysts.