Business News

Christine Lagarde rejects the ECB’s call for immediate action on inflation

Christine Lagarde has rejected a call by the European Central Bank to raise interest rates faster than she had planned in response to lower inflation, saying “it has every reason not to act hastily or aggressively” such as the US Federal Reserve.

The ECB president warned that a sharp rise in interest rates could lead to “interest rates” and told France Inter radio on Thursday that he wanted his monetary policy to be “disruptive” instead.

Rising energy and food prices have pushed up prices in the eurozone to reputation a 5 percent increase in December, exceeding 2 percent of the ECB, prompting the immediate release of its stimulus program. Lagarde, however, predicted that inflation in the bloc would stabilize and “slowly fall” below its target by the end of this year.

The Fed and the Bank of England are expected to raise interest rates several times this year after they stop buying their stocks. But the ECB in December said it was “unlikely” to raise prices this year and outlined plans to continue buying more bonds for more than 2022 years.

“US economic change is ahead of Europe,” Lagarde said. “That’s why we have good reasons not to act as quickly or harshly as the Fed would think.”

Behind Lagarde’s credentials are growing divisions within the ECB’s governing body, which came ahead of its final price-fix meeting in December on key questions about how inflation could be resolved and whether it should remove its impetus immediately.

Although council members agreed that “financial assistance is still needed” for inflation to stabilize over the next three years, some of them warned that “long-term inflation” would not be possible, according to minutes of the conference published Thursday.

“Some members did not question the contents of the package so they could not support everything,” the ECB said. These reservations also include criticizing its idea of ​​increasing the speed of the long-term procurement program from € 20bn per month to € 40bn per month to address the end of new purchases under its € 1.85tn emergency procurement program (PEPP) ) in March.

Opponents, including German, Belgian and Austrian central bank leaders, also refused to extend the bond repayment period under PEPP by a year until the end of 2024.

However, there was a general consensus that as much doubt as to future inflation, the ECB should “maintain the ability to measure and evaluate how the monetary policy is driven by data on all sides”.

While Lagarde believes inflation problems will soon disappear, traders speculate that prices will continue to exceed the ECB’s forecast and force a change in its policy more strongly than planned this year.

Markets now interest rates in two 0.1 percent interest rates rose from the ECB at the end of the year, although the central bank insisted that most of the loans in 2022 did not meet its guidelines.

After a 10-year lease to Germany – which acts as an interest rate rental in the euro area – became positive On Wednesday for the first time since 2019, Lagarde said rising yields meant “the beginning of a healthy economy”.

Critics argue that the ECB is too late to remove its monetary stimulus due to fear this will increase borrowing rates for governments that borrowed heavily during the coronavirus epidemic.

Three German economists – Jürgen Stark, Thomas Mayer and Gunther Schnabl – wrote Project Syndicate Story this week: “It is increasingly likely that inflation will rise sharply without contradicting the monetary policy stance”. But they added: “Such sanctions could cause serious problems for members with large eurozone debts.”

Source link

Related Articles

Leave a Reply

Back to top button