Euro zone wages are growing quicker than earlier thought and the European Central Bank must prevent this from adding to already high inflation, ECB President Christine Lagarde told a Croatian newspaper.
The ECB has raised interest rates by a total of 2.5 percentage points since July in a bid to arrest a historic surge in inflation and has promised even more policy tightening over its next several meetings as longer term price growth expectations have started moving above its 2% target.
“We know wages are increasing, probably at a faster pace than expected,” Croatian newspaper Jutarnji list quoted Lagarde as saying on Saturday. “We must not allow inflationary expectations to become de-anchored or wages to have an inflationary effect.”
Lagarde provided no new policy hint in the interview but said the bank must “take the necessary measures” to lower inflation to 2% from its current rate of near 10%.
Croatia will join the euro zone on Jan. 1 as the currency bloc’s 20th member, entering an elite club at a time of unusual turmoil as the ECB tries to tame inflation after spending the past decade unleashing unprecedented stimulus to rekindle price growth when it was exceptionally low.