Christine Lagarde, President of the European Central Bank said Friday that inflation in the Euro area will not reach the levels in the U.S.

Inflation levels in the euro area have raised concerns about the ECB’s monetary policies. The central bank is behind American and British counterparts when it come to normalization.

Euro zone inflation hit a new record high of 5% in DecemberThis is a result of the soaring European energy prices.

Lagarde spoke via videoconference on Friday at the WEF’s Davos Agenda event, defending the ECB’s policies, arguing Europe was not in the same “state of excess demand” as the United States.

According to her, the U.S. market is at 30% of pre-pandemic levels. The eurozone is however “just about at prepandemic levels”.

According to her, “The labor market is not suffering from the same great resignation as the Great Resignation” and that our unemployment participation rates are very near the pre-pandemic peak.

These two indicators, when viewed carefully, indicate that our pace is not the same as the U.S. and that inflation will likely be lower than in the U.S.

Core inflation — a measure that removes components that are vulnerable to volatility from the inflation figure — in the U.S. is at 5.5%, Largarde added, compared to 2.6% in the euro area.

Lagarde stated that she has a solid forward-looking guidance. “And we will act — there’s no question in my mind that once the criteria are satisfied we will. They are not yet satisfied. 

Last month, although the ECB stated that they would reduce monthly asset purchases in order to save money, it pledged to keep its extraordinary monetary support through 2022.