The euro hit its highest level in more than a month on Wednesday after European Central Bank officials warned that inflationary pressures were still too strong and could open the door to any talks on easing policy in the near term.
"While inflation is likely to have passed its peak, it has come down from very high levels, and is projected to remain well below target levels for a period." said ECB President Christine Lagarde in her speech. "The longer the level of inflation is too high, the greater the danger of staying that way."
Lagarde gave a keynote address at a conference hosted by the ECB itself for economists. The ECB usually uses the conference to strengthen the communication of its policy goals to financial markets. In a speech that made little concession to the risk of financial instability affecting the European zone economy, Lagarde argued that the rise in headline inflation over the past few months had presented a risk.
Various measures of core inflation tracked by the ECB put the rate as high as 8%, Lagarde said. In contrast, headline inflation eased to 8.5% in February from a peak of 10.6% in October.
Lagarde devoted most of her speech to analyzing the influence of wages and corporate profit margins in driving inflation in recent years.
"The European zone has suffered huge losses in trade due to rising energy prices, the costs of which must ultimately be shared between firms and workers," Lagarde said.
German central bank manager Joachim Nagel, on the other hand, said it was too early to conclude that the collapse of Credit Suisse and Silicon Valley Bank would lead to a credit crisis in the European zone, although he admitted that banks may tighten their lending conditions.
