In a world going through “a series of unprecedented shocks”, “where everything is at stake, uncertain and very dark”, central bankers and political leaders must show “cooperation” in order to limit the effects on the economy, argues ECB President Christine Lagarde.
At a minimum, we need to cooperate, among ourselves central bankers, in order to understand the effects and the fallout of our policies, the effect that we have on each other, said the head of the European Central Bank during the course a conference Wednesday at the Institute of International Finance (IIF) Washington.
Beyond that, we also need to show cooperation between monetary and fiscal policy, she added.
Most central banks across the planet are raising their interest rates sharply in an attempt to bring down high inflation. Their objective is to slow down economic activity by increasing the cost of access to credit in particular.
At the same time, many States, particularly in Europe, have released billions in public aid intended to cope with soaring energy prices.
Professionals: cheapest online deals for limit your bank charges
However, the risk of this policy is that it will continue to fuel inflation and thwart the central banks’ plans to slow down activity. This is one of the reasons why the major international institutions like the International Monetary Fund are calling for more directing of this budgetary support towards the most vulnerable.
We have seen good and bad examples of what cooperation or lack of cooperation can cause between monetary and fiscal policies, said Ms Lagarde, without explicitly citing fears at work in the UK where a mini- budget presented in recent days provides for massive public aid at the very time when the Bank of England is tightening its policy.
We are not working in a strictly parallel way, but we must act in a cooperative way because if we don’t, monetary policy will have to act more determinedly in its battle against inflation, said Christine Lagarde. .