ECB's President Lagarde: Energy inflation likely to keep inflation well above target into first half of 2027. Inflation will then decline.

VGK ECB's Lagarde: recent data points to some improvement in economic activitiy - Activity in services partly recovered - Digital services robust, partly on AI - Firms, households expect Labour market to remain weaker than before conflict - Indicators suggest economic activity will remain modest - Energy shock feeding into higher prices - Firms expect to raise selling prices - Underlying inflation contained, full effect yet to play out - Survyes indicate moderate wage growth - Climbing Labour productivity helps contain unit Labour cost growth Lagarde: most measures of longer-term inflation expectations stand at around 2% - Energy inflation likely to keep inflation well above target into first half of 2027 - Inflation will then decline - Conflict a major source of uncertainty Lagarde: risks to growth tilted to downside - Higher energy prices will weigh on real incomes