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Lagarde Says Core Inflation Still ‘Significantly’ Too High

Lagarde Says Core Inflation Still ‘Significantly’ Too High
Christine Lagarde, president of the European Central Bank, at ECB And Its Watchers conference in Frankfurt, Germany, on Wednesday, March 22, 2023. The ECB will take a "robust" approach that allows it to respond to inflation risks as needed but also aid financial markets if threats emerge, according to Lagarde.

European Central Bank President Christine Lagarde said underlying inflation remains “significantly too high” — even after the headline measure of price gains for the euro zone dropped by the most on record this month.

Core inflation, which strips out volatile energy and food costs, accelerated to an all-time high of 5.7% in March, while the main number plunged to 6.9% from 8.5%.

Core and Headline Inflation Aren't in Sync

The ECB still has “ground to cover” to bring inflation back to 2% over the medium term, Lagarde told students in Florence, Italy, on Friday. Nevertheless, the 350 basis points of interest-rate increases since last July “is beginning to work,” she said.

Lagarde reiterated that the recent financial-market stress won’t interfere with the fight against elevated prices, and said Deutsche Bank shouldn’t be compared to the downfall of of Credit Suisse Group AG.

She said Europe’s financial system is strong, meaning something similar to the collapse of Silicon Valley Bank is very unlikely.

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