Governing council 'will not be rushed' into interest rate hikes, ECB chief says
By Alexander Bueso
Date: Thursday 03 Feb 2022
(Sharecast News) - The European Central Bank will not be rushed into interest rate hikes and observers shouldn't overdo it when speculating on possible hikes.
In her press conference following Wednesday's decision, ECB chief, Christine Lagarde, said that risks to the outlook for prices was to the "upside", "particularly for the near-term", although inflation was then expected to decline "gradually" over the course of 2022.
Nevertheless, while the ECB held off from explicitly modifying its outlook for monetary policy at its latest policy meeting, Lagarde was clearly more "conditional" in her comments.
Responding to journalists' questions, she also said that the next round of ECB staff projections for inflation, which were scheduled to be published in March, "might very well" be significantly higher than was anticipated until just recently.
Nonetheless, she stressed that no decisions would be taken until March, when enough data would be available to make an in-depth assessment of the medium-term outlook for inflation.
The governing council, she said, was in full agreement on the need to take the "right steps at the right time" but there was also consensus on the need to avoid "rushing" into a decision until they had all of the necessary data on the table.
Lagarde also emphasised that, as previously guided towards, asset purchases had to conclude before any interest rate hikes, going to add later that "we are not there yet" in referring to the immediacy of possible rate hikes.
In one of her responses, she also highlighted the differences between the UK and the euro area, arguing that the former had a history of higher prices.
Some of the wage pressures in the UK were the result of workers leaving the country and the resulting shortage of workers, she added.
Furthermore, there had been no "significant" movement in wage increases nor a lot in salary negotiations.
She also called attention to the different point in the economic cycle at which the US found itself in and the euro area did, with the former 30% above its pre-pandemic level on the back of fiscal stimulus.
Lagarde also called attention, in a positive light, to the closing output gap in the Eurozone, what with unemployment in the euro area at a record low and labour force participation having now returned to its pre-pandemic level.
On the geopolitical clouds gathering over Ukraine's eastern borders, she said that if the worst scenarios played out that would have a deep impact on prices and activity.
As an aside, Lagarde commented that the end date for ECB staff to submit their next round of projections was now "only a few weeks away".
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