President of the European Central Bank (ECB) Christine Lagarde stated on Thursday, 17 March, that a return to the inflation dynamics that dominated the decade before the Covid-19 pandemic is “unlikely”.
The new period—marked by a surge in energy prices exacerbated by the Russian invasion of Ukraine—is driving inflation to levels that have not been seen since the euro was created and is forcing the ECB to adjust its rates, after the US Fed.
Last Thursday, the monetary institute in Frankfurt noticeably revised its short-term annual inflation projections upwards to 5.1% in 2022, then 2.1% in 2023, and 1.9% in 2024 (see EUROPE 12908/23). She also considers it increasingly likely that inflation is converging towards its medium-term target.
The ECB also indicated that any increase in its key interest rates would be gradual and would take place sometime after the ‘APP’ asset purchase operation has been completed, potentially in the third quarter of 2022, if the conditions have been met.
In Frankfurt on Thursday, Mrs Lagarde asserted that the ECB had “additional margins” between the end of the ‘APP’ operation and an increase in interest rates, the first in over a decade—for example, by reinvesting capital in assets that were acquired during the pandemic and are approaching maturity.
On the same day, the statistical office of the EU (Eurostat) announced that inflation was 5.9% in February, up from 5.1% in January. One year ago, it was 0.9%. In the EU, it was 6.2% in February, compared with 5.6% in January.
The lowest rates were observed in Malta (4.2%), France (4.2%), Portugal (4.4%), Finland (4.4%), and Sweden (4.4%). The highest rates were recorded in Lithuania (14.0%), Estonia (11.6%), and the Czech Republic (10.0%).
The largest contributions to the rise in prices came from energy (+3.12 percentage points, or pp), services (+1.04 pp), and food, alcohol, and tobacco (+0.90 pp). (Original version in French by Mathieu Bion)