Speaking on Saturday, Lagarde hailed Europe’s labor market for withstanding inflation and aggressive rate hikes, with jobs up 4.1% since 2021. She said disinflation has come at “remarkably low cost” to employment, though warned the unusual mix of supportive forces may not last.
–
European Central Bank President Christine Lagarde said Europe’s labor market has held up far better than expected despite soaring inflation and steep interest-rate hikes in recent years. Speaking at the Fed’s Jackson Hole symposium, she noted that employment grew by 4.1% between late 2021 and mid-2025 — almost matching GDP growth and roughly double what economic models would have predicted.
Lagarde credited both global and domestic factors: easing supply constraints, falling energy costs, fiscal support, delayed wage adjustments, and changes in working hours and labor supply. She argued that this resilience allowed inflation to fall back sharply “at a remarkably low cost” to jobs.
With inflation projected to settle at 2% by 2027, policymakers have paused after eight rate cuts, holding the deposit rate at 2% in July. Bundesbank head Joachim Nagel recently said the bar for more action is “high.” Lagarde avoided giving signals on the next rate move, instead cautioning that the unusual mix of forces that preserved jobs may not last, especially as demographics and labor hoarding weigh on productivity — even as technology and AI could offset those pressures.
Earlier:
