Christine Lagarde, President of the European Central Bank (ECB), explains why prices remain high. She notes that recent figures show a decline from the previous month, but inflation as measured by the Harmonised Index of Consumer Prices (HICP) remains volatile. The ECB expects this volatility to persist until the end of 2024, with targets set for the second half of 2025.
Lagarde says that service prices remain stable at 4.1%, according to recent figures. She stresses the importance of understanding whether this stability is the result of permanent changes or lags in the impact of other components. Services, which are heavily influenced by wages, are affected by wage agreements negotiated annually or triennially in different European countries.
Lagarde mentions that recent wage negotiations reflect an increase in wages after several years without revision, in response to inflation that has reduced real wages. She stresses the need to analyze these factors to understand the causes of inflation in services.
Finally, Lagarde notes that corporate profits, although down compared to end-2022, need to absorb increases in wage costs to avoid a second-round effect on inflation. The ECB continues to monitor these data to ensure that service prices are also on a downward trend.
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