President of the European Central Bank Christine Lagarde has stopped being too absolute about inflation. Despite this, she is ‘pretty confident’ that inflation will fall ‘automatically’ by the end of the year and approach 2 percent again next year.
Lagarde said that in a video meeting with the European Parliament this afternoon. As expected, the ECB president had to run the gauntlet for Thursday’s decision to leave interest rates unchanged, while inflation is higher and more persistent than she had expected. Lagarde acknowledges that, but the likelihood of inflation stabilizing has also increased, she said.
The economy is recovering well, despite a lack of raw materials and labour, and will recover even more strongly later this year, unemployment is low, the pandemic seems to have peaked, only geopolitical (Ukraine) is not feeling well yet. But raising interest rates now will not lead to lower energy prices (more than half responsible for the price hikes) or an acute recovery of supply chains.
She patiently continued to explain that the ECB incorporated the disappointing inflation figures into its policy decision last Thursday, but that they will not lead to a policy change for the time being, but that the ECB will also keep a close eye on it in the coming weeks and months.
She received support from the German Green Henrike Hahn: “In 2011, interest rates rose too quickly and that cost growth and jobs.” Lagarde himself added that there is no doubt that the ECB is absolutely committed to price stability.
The ‘basket’ for the inflation calculation, according to answers from the ECB president, will be adjusted slightly, because the rapidly rising house prices will weigh more heavily in this. “It won’t happen overnight, but we’re working on it. It is true that they do not count enough now,” said Lagarde. She was responding to a question from a Cypriot socialist, according to whom the inaccessibility of a home for large numbers of lower and middle incomes is a major social problem.
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Lagarde ‘pretty sure’: inflation will fall at the end of this year, next year again close to 2 percent | Economy
Source link Lagarde ‘pretty sure’: inflation will fall at the end of this year, next year again close to 2 percent | Economy