FRANKFURT (Reuters) – Two senior European Central Bank (ECB) officials stressed on Friday that the Frankfurt-based institution continues to prioritize slowing inflation in the euro zone to prevent it from becoming entrenched.
As price rises in the 19 countries sharing the euro reached a record 10.7% annual rate in October, investors are trying to determine how far the ECB is willing to go to curb inflation.
ECB President Christine Lagarde said on Friday that the institution was ready to tighten monetary policy more quickly if the high level of inflation persisted and inflation expectations strengthened.
“If we were to see, for example, that inflation is becoming more persistent and that inflation expectations are likely to become unanchored, we could not wait for the full impact of monetary policy measures to materialize,” he said. she says during a speech in Estonia.
“We should take additional measures until we are more convinced that inflation will return to the target (set at 2%, editor’s note) in due course,” she added.
His deputy, Luis de Guindos, said for his part that the ECB would continue to focus on moderating demand and capping inflation expectations in order to prevent rapid price growth from taking a permanent hold in the eurozone.
“Monetary policy must remain focused on reducing demand support and guard against the risk of a persistent rise in inflation expectations,” he said at an event in Spain.
The two officials further urged the bloc’s member states not to contribute to soaring prices by incurring expenditure deemed too generous.
Governments must stick to “temporary” and “targeted” support for households affected by the current inflation crisis so as not to fuel demand, insisted Christine Lagarde and Luis de Guindos.
While the US Federal Reserve paved the way on Wednesday for a possible slowdown in rate hikes as early as December, the ECB President said on Thursday that an economic recession in the euro zone would not be enough to bring inflation under control and that the Frankfurt institution could not content itself with duplicating the decisions taken by the American central bank.
Christine Lagarde’s view that economic conditions in the euro zone and the United States are not identical is shared by other members of the ECB, including Ignazio Visco and Fabio Panetta.
The latter, however, said Thursday that the ECB should refrain from raising interest rates too quickly because it could excessively damage economic growth, prices in the real estate sector and financial markets.
(Report by Francesco Canepa and Mark Potter, French version by Laetitia Volga and Claude Chendjou, edited by Sophie Louet and Kate Entringer)