Europe’s inflation problem is entering a new phase: from profits to wages

With earnings becoming essential to determining inflation prospects, the European Central Bank has stepped up its efforts to collect data that are normally only revealed with a long delay and few details. This year, the central bank started tracking the quarterly calls when corporate executives discuss financial results with analysts as part of the policy-making process, Lane said.

Headline inflation in the eurozone has fallen significantly from last year’s high, data showed on Thursday Inflation in Spain fell below 2 percent in June. But other measures of domestic price pressure are still quite strong. The inflation figures for the entire eurozone for June will be published on Friday. Economists polled by Bloomberg expect the overall rate to fall from 6.1 percent in May to 5.6 percent, while core inflation, excluding energy and food prices, is expected to rise from 5.3 percent to 5.5 percent.

Moving on, the central bank forecasts headline inflation to be around 3 percent next year. But there is a risk that the “last mile” to reach the goal will prove more difficult than anticipated, Lane said. repeated by the Bank for International Settlementswhich acts as a bank for central banks.

“We have a 2 percent target, we don’t have a 3 percent target,” Lane said. “A lot will have to be done to go from 3 to 2 percent.”

After July, when the central bank is expected to raise interest rates, Mr. Lane said it was best to have “no signals” about what policymakers would do next because of all the uncertainty about the inflation path, but he expected interest rates to rise. limiting economic growth “for quite some time”.

However, some other members of the bank’s Board of Directors have suggested that interest rates should rise again in September. And the bank’s president, Christine Lagarde, this week countered investor expectations that interest rates would be cut next year, saying monetary policy should be “restrictive” and stay there “as long as it takes.” “.