European Central Bank President Christine Lagarde left the December policy decision open, but stopped short of committing to one as she assessed an inflation surge driven largely by energy. The ECB published her Yomiuri Shimbun interview on Nov. 7, three days after it was conducted.
Asked whether the ECB should raise interest rates before second-round effects from the energy shock become visible, Lagarde said policy would be decided “on the basis of data and meeting by meeting.” She added that the information available to the ECB pointed to an expected direction, without specifying the policy action in that answer.
“So, I cannot tell you today that we will for sure do this in December. What I know is that, on the basis of the information we have today, it would take significant changes for the direction of travel to be different from what I expect.”
The wording keeps the December choice open without making a commitment. It also puts incoming data at the center of the decision, particularly because the latest inflation reading is being pushed higher by energy while underlying measures remain stable.
Energy is driving the headline increase
Headline inflation in October was 4 percent, Lagarde said, higher than the ECB had expected a few months earlier but in line with market expectations. Energy inflation rose to 20.8 percent from 18.9 percent in September, driven by the conflict in the Middle East and less global refinery capacity. Food inflation also increased.
Underlying measures were less disruptive. Core inflation, excluding energy, food, alcohol and tobacco, was 2.5 percent, unchanged from September. Services inflation edged up to 3.3 percent but remained within the range recorded over the previous four months.
Lagarde said the ECB had not yet received the detailed breakdown needed to determine whether the services increase was concentrated in energy-intensive sectors such as transportation or reflected wider indirect effects. She said the central bank would examine that information closely.
