ECB's Lagarde says all moves by central bank need to be 'gradual'
By Alexander Bueso
Date: Friday 11 Feb 2022
(Sharecast News) - The European Central Bank's boss hit back overnight at critics, arguing that any action to bring inflation back into line needed to be "gradual", attributing record inflation readings to energy prices and pointing out that current wage pressures were "very moderate".
In an interview with Redaktionsnetzwerk Deutschland, Christine Lagarde reiterated that the ECB cannot fix the underlying causes behind the recent record readings on consumer price inflation.
"Can we resolve supply bottlenecks? Can we transport containers, lower oil prices or pacify geostrategic conflicts? No, we can't do any of that," she responded, according to a transcript of the interview posted to the central bank's website.
"On the contrary: if we acted too hastily now, the recovery of our economies could be considerably weaker and jobs would be jeopardised. That wouldn't help anybody," she added.
As after the 3 February ECB policy meeting, Lagarde made the point that just over half of the current inflationary pressures stemmed from energy prices.
In turn, energy prices pushed up on fertiliser costs, which fed into food prices "and so on".
The ECB would act if necessary but "all of our moves will need to be gradual", she emphasised.
To make her point she drew an analogy between the driver of a car preparing to make a turn while driving in fifth gear, first she said, it was necessary to slow down and to shift gears.
Lagarde also called attention to the fact that wage settlements across the euro area at the moment were "very moderate", meaning that so-called second round effects from energy price rises were contained.
Furthermore, medium-term inflation expectations were "close to our inflation target of two per cent", Lagarde said.
She also dismissed talk that the shit towards renewable energy was fuelling inflation, explaining that the current impact of decarbonisation was "minimal".
"We must complete the green transition of the economy to prevent the Earth from turning into a frying pan."
Special promo:
Trading the Forex Market? Visit FXmania.com to get advanced infomation about currencies and the Foreign Exchange
Market.
Email this article to a friend
or share it with one of these popular networks:
You are here: news
10 Lower Thames St,
London EC3R 6EN