“We will address all the obstacles likely to threaten our price stability mandate”, says Christine Lagarde

Christine Lagarde speaks from Sintra, Portugal, at the opening of the Central Banks Forum…

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( — Christine Lagarde speaks from Sintra, Portugal, at the opening of the Central Banks Forum. The President of the European Central Bank begins by indicating that inflation in the euro zone is excessively high and should remain so for some time: “this is a major challenge for our monetary policy”.

“In response to the changing outlook for inflation, we have consistently followed the path of policy normalization since December last year, sequentially adjusting our policy. Net asset purchases under our various programs will end this week. In July, we intend to raise our key rates for the first time in 11 years. And we have provided some guidance for our policy meeting in September and the path of rates that we plan to follow by the We will continue on this path of normalization – and we will go as far as necessary to ensure that inflation stabilizes towards our 2% target over the medium term. As Victor Hugo would have said, perseverance is the ‘secret of all the triumphs'”.

The leader goes on to explain that “the euro area differs from some other major economies for two key reasons and the path to normalization must be managed accordingly. First, inflation in the euro area today is fueled by a complex set factors that reflect, in part, our economic structures and strategic dependencies. This creates uncertainty about how quickly inflation will return to our medium-term target. In this environment, we need to act in a determined and sustained manner, incorporating our principles of gradualism and optionality. This means acting gradually in the event of uncertainty about the outlook, but with the possibility of acting decisively on any deterioration in inflation over the medium term, especially if there are signs that inflation expectations are unanchored.

Second, the euro area has a unique institutional structure, built around 19 not yet fully integrated national financial markets and 19 national fiscal policies, with limited coordination. This presents the risk that our monetary policy stance will be transmitted unevenly across the Union. And that is why we have always insisted that flexibility is an integral part of the process of normalizing our monetary policy. It is essential to enable us to adopt the necessary policy stance and to protect price stability in an environment where inflation is too high.”

In this context, Christine Lagarde declares: “we are unwavering in our commitment to ensure that inflation returns to 2% in the medium term. We have designed a strategy of normalization of our policy which allows us to react with agility to the environment of high inflation. And we will ensure that the orderly transmission of our policy across the euro area is preserved. As Leonardo da Vinci said, “every obstacle yields to firm resolve”. We will all address obstacles that could threaten our price stability mandate”.


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