The president of the European Central Bank (ECB), Christine Lagarde, said this Wednesday that the bank is not committed ‘ex ante’ to interest rates, so it has not promised to raise them even more, nor has it ended the uploads.
Lagarde stressed this Wednesday at a conference with ECB observers in Frankfurt that “with high uncertainty, it is even more important that the pace of interest rate movements depends on the data.”
“This means, ‘ex ante’, that we are not committed to raising rates further, nor have we finished with rate hikes,” according to the ECB president.
“Indeed, as I explained last week, if the base case of our most recent projections is confirmed, we still have some way to go to ensure that inflationary pressures are reduced,” Lagarde added in her speech.
The ECB has raised the price of money since July last year by 350 basis points to 3.50%.
The ECB president noted that “although inflation is likely to fall sharply this year due to lower energy prices and the reduction of supply bottlenecks”, core inflation, which excludes energy and food is strong
“In such an environment, our ultimate goal is clear: we must, and we will, bring inflation down on time to our medium-term objective,” Lagarde said.
But given the current conditions, the ECB’s interest rate strategy will depend on the economic situation.
Therefore, the pace of future interest rate movements will depend on how the ECB views the development of inflation, what happens to core inflation, and how the money price increases it has made so far translate into markets and the real economy.
For inflation to come down, it is important that monetary policy works in a restrictive direction and this process is starting to take effect now, according to Lagarde.
Lagarde clarified that they also have sufficient instruments to provide liquidity to the financial system, if necessary, given the volatility of financial markets in recent weeks.
The ECB president reiterated that “the European banking sector is resilient, with strong capital and liquidity positions.”
Source: TSF
