The ECB "will not sit idly by" if rising margins and wages fuel inflation

MADRID, 7 Jul. (EUROPA PRESS) -

The president of the European Central Bank (ECB), Christine Lagarde, has warned that the institution "will not sit idly by" if it observes a "simultaneous" rise in business margins and wages that poses a threat to the stability of prices.

In an interview with 'La Provence', the ECB president highlights that the recent period of high inflation was not accompanied by a reduction in the profit margins of companies, which even increased in some cases, while, at the same time, wages have also risen more than expected.

In the current context, for Lagarde it is important to know if companies are going to reduce their margins a bit to accommodate the expectations of higher salaries for their employees, which is what has normally happened during previous episodes of high inflation, or if there will be " a double increase": in margins and in salaries.

"A simultaneous increase in both would feed inflation risks, and we would not sit idly by in the face of such risks," stressed the Frenchwoman.

In this sense, Lagarde recalls that, despite the recent moderation, inflation is still above the medium-term objective of 2% and, according to projections, it will remain so in 2024 and 2025, so the ECB still has work to do. to do to reduce it and achieve your goal.

"It has started to decline, falling from double digits at the beginning of the autumn of 2022 to half today, at 5.5% in June (...) This is due in particular to the fall in prices of raw materials and energy, and I think also to the initial impact of our monetary policy decisions on prices", he added.