The European Central Bank must remain “attentive and focused” in its pursuit of price stability, its president Christine Lagarde said in a speech on Tuesday, adding that higher wages continued to offset the disinflationary effects of easing supply chain shocks and past monetary tightening.

Lagarde repeated the ECB's position that interest rates are at levels that, if maintained for a sufficiently long duration, will make a substantial contribution to returning inflation to target in a timely manner. (See MNI SOURCES: Market Pricing For Cut Prompts ECB Jawboning)

“The nature of the inflation process in the euro area means that we will need to remain attentive to the risks of persistent inflation as well,” she said. “We have faced a major inflation shock and we have made a major policy adjustment in response. The effects of that adjustment are increasingly being felt and inflation pressures are easing. But there is still a journey ahead of us.”