European Central Bank (ECB) President Christine Lagarde said on Thursday that next interest rate decisions will depend on economic and financial data because increased uncertainty with tension in the financial markets.
However, Lagarde believed there is still some way to go.
The ECB believed that the European banking system is resilient after deciding today to raise interest rates by 50 basis points as planned, as inflation “will stay too high for too long”.
The president of the ECB said at a press conference that the decision was taken by “a very large majority” and that only three or four members of the Governing Council did not support it.
“We are closely monitoring the tension in the markets and we are ready to act,” Lagarde stressed, following the turmoil that hit markets in recent days following the collapse of the North American Silicon Valley Bank (SVB) and the concerns in Europe about the Credit Switzerland.
But the banking sector “is in a much stronger position right now than it was in 2008,” he said.
“The Eurozone economy stagnated in the fourth quarter of 2022, avoiding the expected contraction. However, demand fell sharply,” said Lagarde.
In 2023, the Eurozone is expected to record lower inflation and stronger-than-expected growth, in a context of calm energy prices.
Inflation is expected to remain at 5.3% in 2023, down from a forecast of 6.3% at the end of December, before declining to 2.9% in 2024 and 2.1% in 2025, according to new forecasts from the the institution.
Growth in the Eurozone is expected to reach 1% this year, up from 0.5% previously forecast. An expansion of 1.6% is foreseen for 2024 and 2025.
However, the ECB’s new macroeconomic projections were “finalized in early March, ahead of the recent financial market tensions. These tensions thus imply additional uncertainty around the reference projections for inflation and growth,” the institution itself said in its subsequent communiqué. released. today’s meeting.
The ECB president also defended that eurozone governments should “quickly” start reducing budget support to households and businesses to curb inflation and suggested a debate on “adequate sharing” of the “burden” of inflation, as many companies’ margins have increased in recent months.
Source: DN
