Christine Lagarde, President of the European Central Bank (ECB), explains why prices remain high. She notes that recent figures show a fall compared to the previous month, but that inflation 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 points out 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 delays in the impact of other components. Services, which are strongly influenced by wages, are affected by wage agreements negotiated annually or triennially in various European countries.
Lagarde mentions that recent wage negotiations reflect an increase in wages after several years without revision, in response to inflation which has reduced real wages. She stresses the need to analyse these factors in order to understand the causes of inflation in services.
Lastly, Lagarde notes that corporate profits, although lower than at the end of 2022, need to absorb wage cost increases to avoid a second-round effect on inflation. The ECB is continuing to monitor these data to ensure that service prices also follow a downward trend.
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