The governors of the central banks of Europe, Great Britain and Japan and the president of the Federal Reserve (Fed) of the United States warned this Wednesday of the persistence of inflation, pointing to possible new rises in interest rates, and refused to modify the objectives they intend to achieve.
In a debate held this Wednesday in Sintra, at the ECB Forum, Andrew Bailey, governor of the Bank of England, Christine Lagarde, president of the ECB, Jerome Powell, president of the Fed and Kazuo Ueda, governor of the Bank of Japan, were cautious in their predictions about the end of this cycle of high inflation.
Jerome Powell has set an estimate for 2025 of reaching the 2% core inflation target that has guided US monetary policy. For the Fed chairman, inflation estimates suggest that it will take some time to achieve the price stability that the Fed wants.
“If we look at the inflation estimates, we have consistently said that it will take a long time” to come down to the desired levels, he defended.
“Inflation has proven to be more persistent and not less,” the Fed leader said, adding that the tighter policy, with back-to-back interest rate hikes, had not yet been in place “long enough.”
Christine Lagarde reaffirmed that the ECB will “probably raise” interest rates in July, noting that the decision is made at each meeting according to the data to which it has access.
For his part, Andrew Bailey said he understood why “there is criticism of central banks”, but he said that there was “work to be done which is to bring inflation to the target”.
Kazuo Ueda, for his part, pointed to the maintenance of monetary policy in Japan, where inflation has also been growing, but stressed the uncertainty of the forecasts, especially for 2024.
Questioned about the possibility of altering the 2% goal they proposed for inflation, the governors refused to alter the strategy.
“Given the fight we are waging against inflation,” there is “no way we can change inflation targets,” Christine Lagarde said. “We have to be as persistent as inflation and determined and determined to hit the target, and not debate the target,” the ECB president stressed.
The Bank of England governor reinforced the message, noting that “the objective is the definition and practice of price stability.”
Regarding the markets, the governors indicated that they were focused on the issue more generally, without giving in to pressure. “We’re not focused on just one market,” Jerome Powell said, noting that the Fed is looking for “broader market conditions.”
Lagarde said that the ECB did not forget about the markets, but used various criteria to decide the direction of monetary policy.
The governors believe the banks under their supervision are strong, despite problems at regional US institutions that marred this year. Jerome Powell acknowledged, however, that “lessons have to be learned.”
As for the relationship between the central bank’s measures and budgetary policy, the ECB president asked that support for the pandemic be reduced and for energy prices to adopt “a path of greater sustainability of public finances.”
Source: TSF
