“Don’t question our determination to bring inflation back (in the euro area to 2%). Word of Christine Lagarde, president of the ECB, in the press conference following the rate hike.
Lagarde explained the about-face of headline inflation mainly with the energy price component.
More generally, he added, “price pressures remain strong.”
It is also true that “not only the outlook on GDP growth but also the outlook on inflation has become more balanced”, in the sense that, “if it is true that retail prices could rise further in the short term, the recent falling energy prices could curb inflation faster than expected, which could also translate into weaker underlying inflation dynamics”.
That said, “while headline inflation is indeed slowing, underlying inflation is alive and well”.