Higher interest rates this year?
ECB boss Lagarde puts off MEPs
2/7/2022, 8:37 p.m
“There is no reason for hasty conclusions,” said ECB President Lagarde in Brussels. As expected, the central bank is sticking to its current monetary policy despite the high inflation rate. However, an increase in key interest rates is still within reach.
The European Central Bank wants to phase out its loose monetary policy gradually. “Any adjustment to our policy will be gradual,” said ECB President Christine Lagarde at a hearing before the European Parliament. She again emphasized that interest rates would only be raised after the end of the net bond purchases.
Essentially, Lagarde was repeating statements she had already made following Thursday’s ECB interest rate meeting. In view of the rise in inflation, she no longer ruled out interest rate hikes for this year. She reiterated today that the central bank would wait until the March meeting before taking any further decisions. You will then look closely at the latest projections. “There is no reason to jump to conclusions,” said Lagarde.
The inflation rate rose to 5.1 percent in the euro zone in January. The ECB is aiming for 2 percent in the medium term. “The ECB will play its role and show the necessary determination to ensure price stability,” Lagarde said. “You can rest assured that our commitment to do so remains absolutely unwavering.”
In the short term, inflation is likely to remain elevated, Lagarde said. She referred above all to energy prices and supply bottlenecks. The increase in consumer prices is more broadly based than before. A decline is expected over the course of the year. But even at the end of the year, the inflation rate should be above the ECB’s target value. At the weekend, Klaas Knot, head of the Netherlands central bank, confirmed the prospect of tighter monetary policy. He said on Dutch television that he could imagine a first rate hike in the fourth quarter of this year and a second hike in the spring of 2023. Knot is considered a representative of a tight line.
Other central bankers, including Finland’s central bank chief Olli Rehn, have been more cautious recently. The US Federal Reserve has already decided to end its bond purchases and announced a key rate hike. According to Lagarde, the situation in the euro zone cannot be compared to that in the US or other countries. In the USA, for example, demand is stronger and the job market is in better shape.