Christine Lagarde said that EU inflation is the “hump” of the past, and interest rate hikes in 2022 are “very unlikely”
The President of the European Central Bank said that the euro zone is unlikely to raise interest rates next year, saying that the current rise in inflation is only a temporary “hump”, but added that if necessary, the European Central Bank will act quickly to curb price increases.
Despite Eurozone inflation hitting record highs 4.9% in NovemberWell above the European Central Bank’s 2% target, Christine Lagarde said it is likely to have peaked and will fall next year.
“I see an inflation situation that looks like a hump… The hump will eventually fall,” she said in a virtual event at Reuters. Lagarde also reiterated her view that the European Central Bank is “very unlikely” to raise interest rates next year.
Her comment and recent Policy change At the Federal Reserve, its chairman Jay Powell said this week that it will accelerate the withdrawal of bond purchases to combat soaring inflation, which has intensified expectations of a possible interest rate hike next year.
Lagarde said that it is too early to say what effect the Omicron coronavirus variant will have on Europe’s recent economic recovery and inflation. “We have to wait for scientists to tell us [more about the variant],” she says.
“But again, we need to show very clearly that we are ready [to act] In both directions,” she added. She said that once inflation is expected to remain above 2% in the next few years and meet the interest rate hike conditions set by the European Central Bank, the bank “will take action without hesitation.”
Some economists said that because new restrictions have disrupted trade and shifted demand from services to goods, and exacerbated the supply chain bottlenecks that pushed up global prices, the new variants may mean that inflation will remain in place for a longer period of time. Higher level.
However, Lagarde said that between 55% and 60% of recent inflation has come from soaring energy prices, “there is reason to believe that inflation will fall sharply by the end of 2022.”
In view of the rising uncertainty of the economic impact of the pandemic, Lagarde also said that central bank policymakers are unlikely to make any long-term policy commitments at the meeting two weeks later.
Lagarde said: “There are many ways to clarify the problem without making a long-term commitment. I would mistakenly not make a very long-term commitment because there is too much uncertainty.”
The recent surge in Covid-19 cases and the spread of Omicron variants has made some European Central Bank policymakers reluctant to commit to maintaining their stimulus measures for the long term when they meet on December 16, especially after inflation continues to exceed their expectations this year.
Some conservative “hawks” of the European Central Bank said that it may end all asset purchases next year, much earlier than many investors expected.
Dutch Central Bank Governor Klaas Knot said on Friday that if inflation continues to be higher than expected next year, the European Central Bank may raise interest rates in 2023.
Lagarde said that the purchase of new bonds under its flagship 185 million euro pandemic emergency purchase plan is still expected to end in March, but she added that after that, the ECB has other tools available to “ensure that conditions remain favorable. “.
She said that the European Central Bank can still “act on the market” by reinvesting the proceeds from maturing bonds and continuing to make new purchases in accordance with its traditional asset purchase plan, which some investors expect will increase from the current 20 billion euros per month. The pace has expanded.
Lagarde said that the unemployment rate in the Eurozone fell to 7.3% in October and was close to the pre-pandemic level, which is higher than that of the United States. There are fewer signs of labor shortages or unemployment in Europe.