A rate hike by the European Central Bank will not bring down energy prices, the cause of half of Europe’s inflation, according to the institution’s president Christine Lagarde, as the ECB comes under pressure to start the movement.
If I increase interest rates today, that will not lower the price of energy, underlined Ms. Lagarde on Sunday during an interview with the American channel CBS.
Inflation in Europe is very high at the moment, 50% of it is linked to energy prices, explained Ms. Lagarde, adding that the war in Ukraine has considerably increased these prices.
Central banks around the world have largely begun to raise key interest rates in the face of inflation, in order to increase the cost of credit to slow down consumption, and therefore pressure on prices.
Ms. Lagarde once again defended the position adopted by the European Central Bank, which wants to gradually withdraw its accommodating policy intended, during the crisis, to support the economy.
We will therefore halt asset purchases during the third quarter, with a high probability that we will do so at the beginning of the third quarter. And then we’ll look at interest rates and how fast we’re raising them,” she said again.
Christine Lagarde also pointed out that the different policies adopted by Europe and the United States in the face of the economic crisis caused by the Covid-19, were one of the causes of the different nature of inflation on both sides of the ‘Atlantic.
In Europe, the main emphasis was on keeping jobs, not necessarily on sending checks, which allowed people to keep their jobs despite the drop in activity, and companies to regain their hands immediately. work when their activity resumed.
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Conversely, in the United States, the labor market (…) is incredibly tight, with many vacancies. We don’t have that in Europe at the moment.
And, said Ms. Lagarde, the current labor market situation in the United States is clearly contributing to potential high inflation and a rebound effect where prices rise, wages rise, labor shortages, wages continue to rise and this is reflected in prices. This is one of the differences between our two economies.
Inflation reached 7.5% in March in the euro zone, and 8.5% in the United States.