ECB, still has a way to go.

Christine Lagarde has warned that the European Central Bank «is not done» raising interest rates, saying that inflation «still has a way to go». Her comments came after a sharp fall in European wholesale energy prices, combined with an easing of supply chain bottlenecks, encouraged hopes that eurozone inflation was slowing. US inflation also fell in October and global data indicators suggest that this year’s rampant global inflation has peaked. «I would like to see inflation having peaked in October, but I’m afraid that I would not go as far as that».

Economists polled by Reuters expect eurozone inflation to have slowed to 10.4 per cent in November when the latest price data is released by the European Commission’s statistics agency tomorrow. But Lagarde said there was still some «pass-through», from higher wholesale energy prices to consumer prices, to come. Natural gas prices had fallen about 40 per cent since their peak in September, but Lagarde said this reflected mild recent weather in Europe that reduced energy consumption and helped to fill gas storage tanks, adding that conditions could change for the worse next year. Lagarde’s comments signal that there is likely to be a lively debate at next month’s ECB meeting, with policymakers split between keeping up the pace of rate rises to avert a wage-price spiral or switching to smaller increases on the back of signs of a recession.

Analysts at Goldman Sachs said that a change in how Italy calculated energy prices could propel overall eurozone inflation to a new record of 11 per cent in November, which would put pressure on the ECB to maintain the size of its rate rises.

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