ECB's Lagarde: Inflation increasingly likely to stabilise at 2% medium-term target

"Inflation is increasingly likely to stabilise at our 2% target over the medium term," European Central Bank President Christine Lagarde said on Thursday, as reported by Reuters.

Additional takeaways

"If wages were to notably and persistently exceed that benchmark even as growth was slowing, it could be an indication that household inflation expectations are drifting upwards."

"If wages were to fail to catch up sufficiently – for instance, because uncertainty leads to unions being more cautious – households would be exposed to an even stronger squeeze in real income."

"We have scope to adjust policy in a timely fashion should we see risks of excess inflation extending into the medium term."

"We are keeping open the option to take any necessary measures should the economic consequences of the war escalate and stifle the current recovery path."

"We are ready to use a wide range of instruments to address fragmentation, including the reinvestment of our portfolio held under the pandemic emergency purchase programme."

"We can design and deploy new instruments to secure monetary policy transmission as we move along the path of policy normalisation, as we have shown on many occasions in the past."

Market reaction

EUR/USD's reaction to these comments was largely muted. The pair was last seen posting small daily gains near 1.1050.