LAST UPDATE 16:50
The European Central Bank’s assessment that inflation will begin to decline in 2022 after the rally of previous months was reiterated today by the chairman of the central bank, acknowledging, however, that inflation will remain higher for more than originally estimated, something that has caused concern to the Board. the bank’s.
“Inflation has risen sharply in recent months, exceeding forecasts in January. “This is mainly due to higher energy costs which are pushing up prices in many different industries, as well as higher food prices,” Christine Lagarde told a news conference after the ECB monetary policy decisions. “Inflation is expected to remain higher for longer than previously estimated, but to decline over the course of the year,” he added.
He explained, however, that with most of the inflation rally – almost 50%, as he pointed out – being mainly due to energy, the ECB could not intervene decisively through monetary policy.
“Even if the ECB reduced its bond purchases and then raised its interest rates, would that affect energy prices? No, of course, monetary policy can not influence those prices, which in markets outside Europe “, he stressed.
Concern in the Board
He also acknowledged that the price rally was troubling the central bank. “There is concern about inflation throughout the ECB’s Board. We will continue to focus on the data and we will do so with greater depth at the March meeting, when we will also have new data on wages, “Labor market as a whole and we will be able to do a broader analysis,” he said.
“The March meeting, and then the June meeting, will be crucial,” he said.
“We have a mandate for price stability, but we are determined not to rush into decisions until the detailed work that needs to be done is completed,” he added.
The risks are upward
At the same time, he warned that the risks to inflation are rising, especially in the short term. “If upward pressures start to be passed on to wages and the economy shifts to full capacity, high inflation may remain for longer,” he said.
He also made special reference to the growing geopolitical tensions, noting that a major danger is the further escalation of the crisis in Ukraine, which would lead to a new rally in energy prices.
Although she was faced with a barrage of questions about the central bank’s interest rate intentions, the head of the ECB avoided giving a clear timeline, reiterating that everything would depend on incoming data.
On the course of the eurozone economy, Lagarde noted that the recovery continues and the labor market is further improving thanks to abundant monetary policy support, despite pressures from the rapid spread of the coronavirus micron mutation.
He even noted that the economy is being affected less and less by each new wave of the pandemic.
Dimitris Stolis
Source: Capital
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