Wednesday, June 29, 2022

ECB’s Lagarde says many reasons for inflation spike are temporary

FRANKFURT – Many of the drivers of the recent rise in euro area inflation are temporary and likely to fade into the next year, said Christine Lagarde, president of the European Central Bank.

Euro zone prices are rebounding faster than expected as the economy reopens after the pandemic-induced lockdown, and many ECB policymakers expect inflation to be near or even above the ECB’s target of 2 percent next year. Will be

In an interview broadcast on CNBC on Friday, Lagarde blamed much of the increase on supply disruptions and said inflation should stabilize next year. He was later echoed by Italian ECB policy maker Ignazio Visco.

“We expect more stability to return in the coming year as many of the reasons for higher prices are temporary,” Lagarde said.

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“When you look at what’s causing it, a lot of it is related to energy prices.”

The European Central Bank (ECB) logo in Frankfurt, Germany on January 23, 2020. (Ralph Orlowski/Reuters)

He said “things will fall apart” when new sources of supply are found but warned that higher energy prices could continue as they relate to the transition away from fossil fuels.

Speaking to Italian broadcaster Rai, Bank of Italy governor Ignazio Visco said he saw “no underlying driver” for inflation that persisted ahead of this temporary spike and wages were not being increased.

Lagarde expects “movement” on the inflation front after the labor market tightens, but said there was “a lot of ground to cover” with at least one million more unemployed than before the COVID-19 pandemic. Was.

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The ECB chairman also sought to differentiate between the ECB, which began rolling back its emergency bond purchases this month, although it plans to print money for some time, and the Federal Reserve, which said this week that it expects to begin reducing its bond-buying. plan soon.

“There is an element of tapering in the way they (the Fed) have structured their support package for the economy, whereas we are not in that position,” Lagarde said. “We are in the process of calibrating, and we have started calibrating.”

Asked about the turmoil affecting Chinese property firm Evergrande, Lagarde said: “In the euro area, in particular, direct exposure will be limited.”




This News Originally From – The Epoch Times

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