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ECB President Christine Lagarde warns of quick wage growth fuelling inflation in the Eurozone

Eurozone wages are growing at a faster pace than anticipated, according to European Central Bank (ECB) President Christine Lagarde.

Christine Lagarde
Christine Lagarde

In an interview with the Croatian newspaper Jutarnji list, Lagarde warned that the ECB must take action to prevent the quick wage growth from adding to already high inflation in the region. Since July, the ECB has raised interest rates by 2.5 percentage points in an attempt to curb the recent surge in inflation. The bank has also pledged to implement further policy tightening at upcoming meetings, as longer-term price growth expectations have surpassed the ECB's target of 2%.

Lagarde calls for measures to lower Eurozone inflation to 2%

Lagarde stated that the ECB must "take the necessary measures" to lower inflation, which is currently at a rate of nearly 10%, to the target of 2%. She added that the Eurozone's expected winter recession, caused by high energy costs, is likely to be short and shallow, provided there are no additional shocks.

Croatia will join the Eurozone on January 1st as the currency bloc's 20th member, entering a time of unusual turmoil as the ECB tries to address inflation after a decade of stimulus measures aimed at increasing price growth when it was exceptionally low. Lagarde emphasized the need for caution in order to avoid the domestic factors contributing to inflation, including fiscal measures and wage dynamics, becoming entrenched.