ECB: Lagarde says current inflationary shock is less severe than in 2022, but risks remain

"Compared with the previous bout of inflation, the current shock appears to be of a more limited scale and is occurring in a different context. During the previous episode, the economy was emerging from the pandemic, which had created significant macroeconomic imbalances, including disruptions to supply chains and highly accommodative monetary and fiscal policies to support the recovery. By contrast, at the start of the current shock, inflation was closer to target and monetary and fiscal policy were no longer highly accommodative.” This was stated by ECB President Christine Lagarde in her address to the European Parliament’s Committee on Economic and Monetary Affairs in Brussels. “This suggests,” she explained, “that the pass-through of the shock to prices may so far have been more limited, although risks remain should the shock intensify or persist.”

"But this does not mean we can afford to be complacent: following the period of high inflation in 2022 and 2023, price and wage formation could be more sensitive to new shocks."

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