The European Central Bank (ECB) will “continue” with its rate hikes at its July monetary policy meeting because it is too early to “declare victory” in the fight against inflation in the euro zone, its president said on Tuesday. Christine Lagarde.
“In the near future, it is unlikely that the central bank will be able to say with certainty that rates have peaked,” added Christine Lagarde.
The institution that is the guardian of the euro decided at its last monetary policy meeting held in June an eighth rise in its reference rates in less than a year, by a quarter of a percentage point, to place its reference rate on deposits at 3.5 %. On this occasion, Christine Lagarde had described as “very likely” the prospect of a rate hike in July, for her next meeting.
The ECB justifies its monetary policy by persistent inflation
The ECB embarked on this unprecedented cycle of monetary tightening a year ago to counter rising prices and now some voices are calling for a pause so as not to weigh further on economic activity.
On the contrary, the official warned on Tuesday against a “too rapid withdrawal of monetary policy” in the face of a “more persistent inflation process” in the euro zone. He underlined the “uncertainty” around the effect of his monetary policies, both in their “duration” and in their “level”.
The rise in prices in the euro zone fell to 6.1% annually in May, far from the record of 10.6% reached in October, but also far from the 2% target pursued by the central bank.
“Several years of salary increases await us”
Therefore, the phenomenon is now stimulated by the increase in wages, as part of a “sustainable recovery process” in purchasing power.
“We have several years of salary increases ahead of us,” Christine Lagarde said on Tuesday. She also called on companies to do their part by absorbing “rising labor costs into their margins” rather than raising their prices.
The last projections of the institution published in June foresee inflation of 5.4% this year and then fall to 2.2% in 2025.
Source: BFM TV
