Lagarde considers that the recession will not be enough to curb inflation
The President of the European Central Bank (ECB), Christine Lagarde, considers that the mild recession contemplated in the forecasts will not be enough to calm the inflationary pressures in the eurozone. Along the same lines, the president of the Bundesbank, Joachim Nagelstressed that it is not necessary to give in to political pressure “because new rate hikes are now necessary to deal with escalating inflation”.
In this regard, the central banker of the euro zone has reiterated the ECB’s determination to fulfill its mandate and use all the tools at its disposal to do so. “Deciding meeting by meeting the most effective way to reach our goal,” she stressed.
Lagarde has insisted on the different situations in the United States and the euro zoneafter what the Federal Reserve (Fed) rose another 0.75 yesterday points interest rates, noting that US inflation is driven by strong demand and a labor market with more vacancies than job seekers, while acknowledging the interdependence of economies.
“We are not the same and we cannot advance at the same pace and with the same diagnosis, but we are also influenced by the consequences (of the Fed’s decisions) on the markets,” he pointed out. Last week, the Governing Council of the ECB decided to raise interest rates by 75 basis points, placing the type of interest for your refinancing operations in the two%its highest level since January 2009.
The institution then indicated that with this third consecutive rise in rates it had achieved “considerable progress in reversing the accommodative stance of monetary policy”although he announced that he plans to continue raising rates to return inflation to the 2% target.
The Bundesbank advocates raising rates
During an informative breakfast organized in Madrid by the New Economy Forum, the Bundesbank has insisted that although there may be criticism or recommendations from the political environment, which often focuses on the short term, no need to retreat them while interest rates rise.
With inflation in the Eurosystem at 10.7%, Nagel has stressed that there is a significant gap to the target set and much remains to be done. Also, he has stated that we are experiencing a truly serious and unprecedented situation that the bankers cannot control, with a lot of heterogeneity between countries, and that it is unfair to blame those who did not make the decision to raise interest rates earlier in Europe.
The president of the Bundesbank has also assured that it would be “fantastic” if politicians understood the independence of central banks and that their task is to fulfill their mandate with the greatest stability for the Eurosystem as a whole and that only by joining forces can this challenge be faced reduce inflation and improve the economy.
Nagel says bank losses should be considered
Regarding the bank tax announced by Spain, Nagel has indicated that without going into detail it must be pointed out that It is a decision made by politicians. and that it should not be forgotten that in a difficult economic situation, rates will rise more and there is a greater probability that we will see more losses in the banks’ balance sheets.
Our role as central banks is to increase the resilience of banks and avoid further contraction in the economy and an impact on financing, he added while wondering what such a tax means in this context. For his part, the Governor of the Bank of Spain, Pablo Hernandez de Koshas confirmed that an opinion will be published very soon on how this tax affects the ECB’s objectives of monetary policy and financial stability.
The president of the Bundesbank has also confirmed that the December meeting will study how to reduce the asset portfolio of the ECB balance sheet, with 5 trillion euros, and an intelligent and orderly solution will be sought to carry it out from next year. As to whether a rent agreement In a context of inflation like the current one, he has stated that decisions of this type correspond to the Governments but that if they trigger higher inflation they would not be useful for monetary policy: “There has to be a common understanding”.
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