The European Central Bank is still far from defeating inflation and must continue to curb economic growth, Christine Lagarde, president of the European Central Bank, said in a newspaper editorial Friday.
The ECB cut interest rates by a record low on Thursday, but stopped short of promising further easing after a string of disappointing wage and inflation data in recent weeks.
“There is still a long way to go before inflation is eliminated from the economy,” Lagarde said in an article published in several European newspapers, including the Finnish daily Keskisuomalainen. “This will not happen smoothly.
While on Thursday Ms. Lagarde said it was highly likely that the rate cut would not just be a one-off, but mark the start of a reduction process, she appeared to take a more cautious stance on Friday.
“We still have to keep our foot on the brake for a while, even if we don’t press as hard as before,” she said. “Interest rates will therefore have to remain restrictive for as long as necessary to ensure lasting price stability.
While most politicians who speak publicly refuse to discuss the ECB’s next move, they have all but ruled out a rate cut in July when speaking off the record.
Adding to the recent string of bad news, growth in compensation per employee, a key measure monitored by the ECB, accelerated to 5.1% in the first quarter, from 4.9% in the three months previous, according to data released Friday, which suggests even stronger wage pressures. (Reporting by Balazs Koranyi; Editing by Andrea Ricci)
