FRANKFURT (Reuters) – The European Central Bank is still a long way from defeating inflation and needs to keep putting the brakes on economic growth, European Central Bank President Christine Lagarde said in a newspaper editorial on Friday.
The ECB cut interest rates from a record high on Thursday but held back from promising any more easing after a string of disappointing wage and inflation data in recent weeks.
“There is still a long way to go until inflation is squeezed out of the economy,” Lagarde said in a piece published in several European newspapers, including Finland’s Keskisuomalainen. “It will not be an entirely smooth ride.”
While Lagarde on Thursday said there was a strong likelihood the rate cut was not just a one-off but the start of a dialling-back process, she appeared to take a more cautious stance on Friday.
“We still need to have our foot on the brake for a while, even if we are not pressing down as hard as before,” she said. “Interest rates will therefore have to remain restrictive for as long as necessary to ensure price stability on a lasting basis.”
While most policymakers speaking on the record refuse to discuss the ECB’s next policy move, they have all but ruled out a rate cut in July when speaking off the record.
Adding to the recent run of bad news, growth in compensation per employee, a key measure watched by the ECB, accelerated to 5.1% in the first quarter from 4.9% in the previous three months, data showed on Friday, pointing to even more wage pressures.
(Reporting by Balazs Koranyi; Editing by Andrea Ricci)
