Lagarde flags sticky inflation ahead as ECB weighs December move

What Lagarde told the paper

In an interview published Saturday, ECB President Christine Lagarde said, "We know that inflation numbers will remain high in the quarters to come." She added that the higher and more persistent the readings, the bigger the threat to the bank's medium-term objective.

She said the ECB will pore over the detailed October breakdown before deciding next month's rate move. On wage pass-through, Lagarde said the central bank isn't seeing second-round effects "beyond what we have incorporated in our projections."

Lagarde, 70, said last month she will step down in February, roughly nine months earlier than planned.

The data and policy backdrop

Core inflation in October was flat from September at 2.5%, and the ECB is watching the internals. Meanwhile, headline inflation is running at about double the 2% target, according to Eurostat.

Officials say another 25-basis-point increase is being weighed for December, on the heels of two actions taken after the Iran war drove energy prices upward. The balancing act is how much tightening the 21-country euro area can absorb without derailing growth. A further increase would put rates at the upper bound of a range seen as non-damaging to growth, while the latest surge in worldwide bond yields is tightening conditions on its own.

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Lagarde said, "I cannot tell you today that we will for sure do this in December," noting it would take meaningful new information to alter the current path. She also said, "We're watching carefully the forward-looking indicators - multi-year wage agreements, companies' wage expectations - and we don't see evidence of a shift yet."

Politics, succession, and what it means for your portfolio

The Eurogroup president said Friday that Dutchman Klaas Knot and Spain's Pablo Hernandez de Cos are in the running to succeed Lagarde. Asked about France's 2027 presidential race, Lagarde said, "It's not my plan. It's not my future. But I want to be able to speak up in that debate." She added she will not stay silent when a leading candidate says "that sovereign debt should be burnt."

Why this matters: the ECB is data dependent into December, with wages and inflation breakdowns in focus while bond yields tighten financial conditions on their own. Rate-sensitive assets and euro credit remain keyed to whether the bank nudges policy to the top of its neutral zone or pauses to protect growth.

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