The president of the European Central Bank, Christine Lagarde, and the vice-president of the entity, Luis de Guindos, stated that inflation in the euro area continues to be strong, especially with regard to the underlying or core index, despite the drop in the overall average.
“We believe that headline inflation is going to come down considerably this year while core inflation dynamics will remain strong,” de Guindos said in a speech in Italy today.
The official adds to the statements made by Lagarde yesterday, who admitted that core inflation continues to be “significantly very high.”
In a speech to students in Florence, Italy, broadcast by the Bloomberg news agency, the French director indicated that the ECB still has “ground to cover” to bring inflation back to its medium-term target of 2% year-on-year.
However, he stressed that the interest rate increases implemented by the entity since last July “are beginning to work” in the euro area, made up of about twenty countries that use the euro as their currency.
In this sense, de Guindos ratified the ECB’s position to avoid ruling on the path to follow with rates and affirmed that it “will depend on the data.”
Yesterday the European statistics institute Eurostat reported that general inflation for March in the Eurozone stood at 6.9% annually, which represents a further decrease after having reached a historical record of 10.6% last October and 8.5 % last month.
Although energy dragged headline data substantially lower, the biggest source of concern lies in both food prices and core inflation that continues to set new records.
Food rose 15.4% annually compared to 15.0% in February, while the underlying index – which excludes the volatile values of this component and energy – marked a new record of 5.7%, with a rise of the services.
For their part, both de Guindos and Lagarde referred to the banking turmoil in recent weeks that, although it began in the United States, had a contagion effect in Europe that led to the forced sale of Credit Suisse to UBS banking.
De Guindos assured that the European banking system is “resilient” with “strong liquidity and capital positions that are above the minimum requirements.”
“It is too early to draw conclusions about what the impact of all this will be on growth and inflation. The turbulence may be short-lived, but if there are amplified effects, they will be seen in the data,” added the Portuguese.
For her part, Lagarde reiterated that the tensions in the financial system will not interfere with the policy that the entity follows with regard to inflation, and, like de Guindos, pointed out that European banking is strong and that a collapse is unlikely. such as Silicon Valley Bank (SVB) in the United States.