Lagarde (ECB) assures that she sees risks for inflation "in both directions"

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The president of the European Central Bank (ECB), Christine Lagarde assured this Friday that she sees risks for inflation «in both directions«, since it considers possible a rebound in prices due to geopolitical tensions as well as downward pressures derived from an «unexpected deterioration in the economic environment.» «The Upside risks include increased geopolitical tensions as well as higher wage growth and stronger-than-anticipated profit margins. Downside risks include monetary policy slowing demand more than expected and an unexpected deterioration in the economic environment in the rest of the world,» she said during her speech at an event organized by the World Bank. Lagarde stressed that, in recent months, «the process of disinflation in the euro area has continued, expanding to all the main components of inflation.» «The current decline reflects the fading impact of past large supply shocksthe lower prices of energy raw materials and a restrictive monetary policy that weighs on demand,» he added. Looking to the future, he anticipated that «the degree of further disinflation depends on the interaction of labor costs and profit margins«, although he has noted that «the disinflation process is expected to continue, especially once the recovery in productivity growth begins to reinforce the downward pressure on the growth of labor costs.» On the situation of the labor costs, has stressed that «wage growth has been high amid tight labor markets, but began to moderate in the second half of 2023«. «Along with negative productivity growth, high wage growth kept growth in unit labor costs high, although Profit margins are absorbing some of their impact on inflation«, it is finished.