The European Central Bank won’t hesitate to act if officials see a simultaneous uptick in both company margins and wages, President Christine Lagarde said.
In an interview with French regional newspaper La Provence, she said policymakers still have “work to do” to bring inflation under control.
Officials want to know if businesses will accept a profit squeeze to compensate workers, “or whether we are going to see a twofold increase – in margins and in wages,” she said. “A simultaneous increase in both would fuel inflation risks, and we would not stand idly by in the face of such risks.”
The ECB chief’s comments precede a decision on July 27 that is all but certain to feature a quarter-point interest-rate increase. Policymakers are debating whether to raise borrowing costs again at their subsequent meeting in September.
Hawks such as Bundesbank President Joachim Nagel have previously argued toward another hike then. On Thursday, he stopped short of mentioning that, saying that where exactly rates settle will be decided “based on the data.”
Bank of Italy chief Ignazio Visco, one of the ECB’s more dovish officials, earlier this week urged colleagues to proceed cautiously, saying he didn’t understand the preference for “being a bit more rather than less restrictive,” and that the ECB should have a “symmetric attitude.”
--With assistance from Angela Cullen.
