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ECB President Christine Lagarde said October headline inflation was 4%, driven largely by higher energy prices, while core inflation remained at 2.5%. In a Yomiuri Shimbun interview, she also said the ECB and other central banks had misjudged the 2021 inflation shock as temporary, and stressed that future policy decisions will depend on incoming data.
The European Central Bank’s Christine Lagarde said euro-area annual headline inflation reached 4% in October, largely because energy inflation rose, while underlying price measures were more stable. In an interview published by the ECB on November 7, she also said central banks had been wrong to treat the 2021 inflation surge as a temporary supply shock, a lesson she said informs policy-making amid today’s uncertainty.
Lagarde told Hironari Akiyama of Japan’s Yomiuri Shimbun that October headline inflation was higher than the ECB had expected a few months earlier, although it matched market expectations. She said energy inflation rose to 20.8%, from 18.9% in September, citing the Middle East conflict and reduced global refinery capacity. Food inflation also increased, she said.
By contrast, core inflation was 2.5%, unchanged from September. Services inflation edged up to 3.3%, which Lagarde said remained within the range recorded over the previous four months. She said the ECB had not yet received a detailed breakdown that could show whether services prices were being pushed mainly by energy-intensive sectors such as transport or by wider indirect effects.
Lagarde said the ECB was not currently seeing evidence of second-round effects beyond those already included in its projections. She pointed to multi-year wage agreements and company wage expectations as indicators the central bank was monitoring. She declined to predict whether the next forecast would be revised upward, saying the forecast exercise would weigh higher energy futures and long-term interest rates alongside more recent declines in oil prices.
Inflation Pressure and ECB Policy
The interview matters because it sets out how the ECB is interpreting a sharp rise in headline inflation without treating that figure alone as proof of broader price acceleration. Lagarde said inflation is likely to remain high in coming quarters and warned that the risk to the ECB’s medium-term target grows the higher inflation is and the longer it lasts. The distinction between energy-driven inflation and underlying measures may shape how policymakers assess whether price pressure is spreading.
Her comments also underline the challenge facing central banks when energy costs and supply disruptions change quickly. Lagarde said forecasts would assess how developments in energy markets and interest rates affect medium-term inflation and growth. She did not announce a policy-rate decision or signal a specific change in rates in the interview.
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Lessons From the 2021 Inflation Shock
Asked about criticism that the ECB was behind the curve after the energy shock and Russia’s invasion of Ukraine in 2021, Lagarde described the earlier assessment as shared across major central banks. She said officials at the Bank for International Settlements, including representatives from the Federal Reserve, Bank of England, Bank of Japan and ECB, had viewed the shock as supply-driven and likely to fade.
In retrospect, she said, that view was misguided because a demand shock was also underway as economies reopened and consumers spent savings accumulated during restrictions. Lagarde said current conditions include trade and supply-chain disruptions, a more fragmented global economy and greater emphasis on security over efficiency. The ECB has said it will make monetary-policy decisions meeting by meeting and on the basis of data.
The interview also addressed women’s representation. Lagarde said there were two women among 27 people at ECB Governing Council meetings: herself and Executive Board member Isabel Schnabel, whom she said was due to step down at the beginning of January. Lagarde attributed low representation in senior appointments partly to the developing pipeline of women candidates and partly to decision-makers tending to choose people like themselves.
“The higher they are, and the longer they remain high, the greater the risk to our medium-term target.”
— Christine Lagarde, ECB president, in the Yomiuri Shimbun interview
Drivers Behind October’s Price Rise
The detailed inflation breakdown was not yet available when Lagarde gave the interview, leaving it unclear whether services inflation reflects mainly transport and other energy-intensive sectors or broader indirect effects. She also said the ECB was not seeing signs of second-round effects beyond its projections, but described wage indicators as areas the bank continues to monitor.
The interview did not establish how the changing energy outlook, higher long-term interest rates and recent movement in oil prices will affect the ECB’s next medium-term inflation forecast. Lagarde did not specify a future rate decision. The timing and scale of any policy response therefore remain dependent on incoming data and the forecast assessment.
ECB Forecast and Data Review
The ECB’s next forecast exercise will assess how energy futures, interest rates and other economic developments affect the outlook for inflation and growth. Lagarde said policymakers would examine the detailed inflation breakdown, particularly the sources of services-price increases, as it becomes available.
For now, the bank’s stated approach is to make decisions on the basis of data at each meeting. The interview offered no commitment to raise, lower or hold rates at a particular future meeting; the next policy direction will depend on how inflation, wages and economic conditions evolve.
Key Questions
What did Lagarde say about euro-area inflation in October?
She said annual headline inflation was 4%, higher than the ECB had expected a few months earlier but in line with market expectations. Energy inflation rose to 20.8% from 18.9% in September, while core inflation stayed at 2.5%.
Did Lagarde signal an interest-rate increase?
No. She did not announce or forecast a specific rate decision. She said the ECB would evaluate incoming data and use its forecast exercise to assess the effects of energy prices, interest rates and other developments.
What did Lagarde say central banks got wrong in 2021?
She said central banks, including the ECB, initially judged the inflation shock to be a temporary supply shock. In hindsight, she said that assessment missed a simultaneous demand shock as economies reopened and consumers spent accumulated savings.
Is the ECB seeing second-round inflation effects?
Lagarde said the ECB was not seeing signs of second-round effects beyond what was already included in its projections. She said officials were monitoring wage agreements and company wage expectations.
What did Lagarde say about women at the ECB?
She said two of the 27 people at Governing Council meetings were women: Lagarde and Executive Board member Isabel Schnabel. She said senior appointments are made by member-state governments and pointed to both the developing pipeline of women candidates and decision-makers’ tendency to appoint people like themselves.
Source: ecb.europa.eu
