Lagarde admits more economic risks because of inflation

BrusselsThe European Central Bank (ECB) is not changing course, but inflation is breaking historical records and concerns about the risks and consequences it has and will have on the economy are also rising at the institution’s headquarters in Frankfurt, Germany. At the ECB’s Governing Council meeting on Thursday, there were no major changes: the debt-buying program will end in the third quarter of this year and interest rates are at an all-time low of 0%. from 2016, they will not be played until then. But in the words of the president of the institution, Christine Lagarde, there is more concern and more determination to start acting. As a result, it has become more clear that the purchase of debt will end in the third quarter, which brings the date closer to deciding on interest rates.

“We stick to the sequence we set ourselves: first complete the debt purchases and some time later we will decide on the interest rate hike and other subsequent hikes,” Lagarde said. Interest rates will therefore remain the same until “some time later” after the end of the debt purchase program (PPP), which is scheduled for the third quarter of the year. The subtle novelty here is that it is confirmed “more specifically”, in Lagarde’s words, that the APP will conclude the third quarter, because after analyzing the latest macroeconomic data, the ECB considers its intentions to do so “strengthened”. like this.

However, the ECB always reserves a margin. “Some time later,” as Lagarde has said, is a deliberately ambiguous expression that can mean from “weeks” to “months” after the third trimester. And when does the third quarter end? Well, in any of the three months that the ECB considers relevant, according to the former French minister. That is, at least until the end of June, the ECB does not plan to touch rates, but it is unclear whether it will be in July or September. And it is not until then that the ECB expects inflation to start approaching its target of around 2%. “Inflation will remain high in the coming months,” said a statement from the Frankfurt-based agency. Right now, however, it is soaring across the eurozone, 7.5% according to the latest Eurostat data, mainly due to rising energy prices due to the war in Ukraine.

All this ambiguity studied demonstrates the institution’s desire for flexibility to be able to maneuver in a scenario of maximum volatility: “In the current conditions of high uncertainty, the governing council will maintain the optionality, graduality and flexibility in the management of It will take all necessary measures to fulfill the ECB’s mandate to pursue price stability and to help safeguard financial stability, “the statement said.

The war is therefore the main concern of the ECB and the main European institutions, which for weeks now have assumed that the conflict has damaged the path of economic growth that was beginning to consolidate after the coronavirus pandemic. The ECB itself admits that “the development of the economy will depend fundamentally on how the conflict evolves, the impact of current sanctions and possible further action.” Lagarde has predicted that eurozone growth will be “weak” this year precisely for this reason.

Facebook
Twitter
LinkedIn
Pinterest
Pocket
WhatsApp

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Recent News

Editor's Pick