Lagarde is convinced that the tool to combat the fragmentation of the markets in the eurozone will allow the European bank to raise interest rates “as much as necessary”
European Central Bank (ECB) President Christine Lagarde assured Tuesday that the institution is ready to go “as far as necessary” to ensure inflation stabilizes at 2% over the medium term. In this way, Lagarde is confident that the instrument to combat the fragmentation of the markets in the eurozone will allow the European bank to raise interest rates ‘as much as necessary’.
In her opening speech at the forum that the ECB is organizing these days in Sintra (Portugal), the president of the entity confirmed the roadmap for European monetary policy. The sovereign debt purchase program ends on Friday, July 1, and the European bank will raise interest rates by 25 basis points that same month. In addition, there will be a second rate hike in September, the magnitude of which will depend on the evolution of inflation forecasts.
The Russian invasion of Ukraine has triggered a supply shock in the European economy that could last longer than expected, according to the ECB’s analysis. Despite supply chain problems “easing”, the entity expects energy and commodity prices to continue to rise in the medium term. With these forecasts, the ECB will act “gradually, but resolutely”.
“We will continue on the path of normalization and go as far as necessary to keep inflation at 2%,” Lagarde said. The French even said that the ECB will not hesitate to intervene if the inflation outlook deteriorates due to possible gas cuts by Russia, for example.
On the road to the normalization of monetary policy, the President of the European Bank reiterated the importance of its correct application in the various countries of the eurozone. To achieve this, the institution is devising a new instrument to combat the fragmentation of the common currency markets. This mechanism “must be both effective, proportionate and include sufficient guarantees to maintain Member States’ momentum towards sound fiscal policies,” Lagarde stressed.
Source: La Verdad
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