Christine Lagarde expects inflation to fall in 2022

The European Central Bank expects to see the high inflation of recent months, strongly driven by energy, lose force during 2022, said Friday its president Christine Lagarde.

Inflation drivers are expected to lose steam over the course of the year, after peaking at 5% last December, Christine Lagarde told the Paris Senate, confirming the ECB’s unfailing commitment to bring the price towards the vis level of 2%. We understand that this price increase worries a large number of our fellow citizens, and we take this concern very seriously, underlined the Frenchwoman.

The high inflation at the time stemmed from a rapid recovery in economic activity in the euro zone, which led to sharp increases in the prices of fuel, gas and electricity. The energy component thus contributed about half of the current inflation rate, pointed out the Frenchwoman. Prices for durable goods and some services have also soared as demand outstrips supply constrained by long-lasting shortages in the supply chain.

No rate hike before 2023

The ECB decided in December to gradually slow down its net asset purchases in 2022, from around €80 billion to €20 billion per month, but retaining flexibility to deal with various negative scenarios. It thus differs from the more proactive action in the face of inflation by the American Federal Reserve, which intends to raise its rates this year. For the ECB, there is no question of it before 2023.

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In the medium term, Christine Lagarde expects greater volatility in energy prices due to the shift towards green energies, which involves significant use of natural gas used in addition to the development of renewable energies.

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