Inflation Proves Persistent as It Moves Through the Eurozone Economy

The nature of the inflation problem in the eurozone is changing, and interest rates will need to be higher for longer than policymakers and investors once estimated, Christine Lagarde, the president of the European Central Bank, said on Tuesday.

The slower decline in inflation “is caused by the fact that inflation is working its way through the economy in phases, as different economic agents try to pass the costs on to each other,” Ms. Lagarde said. Companies have passed on costs to customers, and now workers are trying to catch up from lost wages caused by high prices.

Policymakers are still concerned about core inflation, which strips out food and energy prices and is one way to measure how deeply price pressures are embedding in the economy. That measure declined to 5.3 percent in May, from 5.6 percent the previous month.

Workers are now seeking higher pay to make up their lost purchasing power. The central bank expects wages to rise 14 percent by the end of 2025 as they return to prepandemic levels, once adjusted for inflation.