Inflation seen declining towards 2% in H2 2025 (Il Sole 24 Ore Radiocor) - Frankfurt, 18 Jul - Higher wages in the eurozone were offset by lower profits, according to Christine Lagarde, the president of the European Central Bank.

She added that inflation is expected to fluctuate around current levels for the rest of the year, partly owing to energy-related base effects. It is then expected to decline towards our target over the second half of next year, owing to weaker growth in labour costs, the effects of our restrictive monetary policy and the fading impact of the past inflation surge.

Eurozone inflation eased to 2.5% year on year in June, from 2.6% in May.

"Domestic inflation remains high. Wages are still rising at an elevated rate, making up for the past period of high inflation. Higher nominal wages, alongside weak productivity, have added to unit labour cost growth, although it decelerated somewhat in the first quarter of this year. Owing to the staggered nature of wage adjustments and the large contribution of one-off payments, growth in labour costs will likely remain elevated over the near term. At the same time, recent data on compensation per employee have been in line with expectations and the latest survey indicators signal that wage growth will moderate over the course of next year.

Moreover, profits contracted in the first quarter, helping to offset the inflationary effects of higher unit labour costs, and survey evidence suggests that profits should continue to be dampened in the near term," Lagarde said.

She added that eurozone inflation is expected to"fluctuate around current levels for the rest of the year, partly owing to energy-related base effects. It is then expected to decline towards our target over the second half of next year, owing to weaker growth in labour costs, the effects of our restrictive monetary policy and the fading impact of the past inflation surge. Measures of longer-term inflation expectations have remained broadly stable, with most standing at around 2%." The ECB targets an annual inflation of 2%.

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(RADIOCOR) 18-07-24 15:26:37 (0486) 5 NNNN