Lagarde warns prolonged inflation raises medium-term risks
Christine Lagarde, President of the European Central Bank (ECB), said October inflation of 4.0 percent largely reflected energy costs. She warned that persistently high inflation increases risks to the medium-term target.
Energy drives the inflation gap
Energy inflation reached 20.8 percent in October, from 18.9 percent in September, reflecting Middle East conflict and reduced global refinery capacity.
Food inflation also increased.
Core inflation held at 2.5 percent; services inflation edged up to 3.3 percent, within its four-month range.
Lagarde reported no second-round effects beyond those in ECB projections.
Detailed data would help distinguish energy-intensive services from broader indirect effects.
Higher energy futures and long-term rates would inform the next forecast.
She acknowledged that central banks misread the 2021-22 shock by overlooking simultaneous reopening demand.
Policy remains data-dependent and meeting-by-meeting; she made no commitment for December.
Debt pressures meet digital risks
Lagarde linked higher global long-term yields to inflation, sovereign borrowing and competition for funding from AI companies.
Highly indebted euro area countries face greater sensitivity; she urged compliance with fiscal rules.
No ECB tool, including the Transmission Protection Instrument, was ruled out, subject to conditions and Governing Council judgment.
She urged cooperation against AI-enabled cyberattacks and offered the Bank of Japan exchanges on digital currencies, including potential links between instant payment systems.
An earlier exit
Lagarde said her departure comes a little less than nine months early, after seven years, to let her defend the rule of law and international cooperation more freely.
She ruled out running for the French presidency but left chairing the World Economic Forum open.
She identified Governing Council cohesion as an achievement.