The era of low inflation in Europe is over


We are increasingly convinced that medium-term inflation dynamics will not return to the pattern we saw before the pandemic.

Christine Lagarde, President of the European Central Bank.

The president of the European Central Bank (ECB), Christine Lagarde, affirmed that the rise in prices will leave a mark and that inflation will not return to the low levels prior to the pandemic and the war in Ukraine.

“We are increasingly convinced that the dynamics of inflation in the medium term will not return to the pattern we saw before the pandemic,” when the indicator remained permanently below 2%, the ECB’s target, Lagarde told a conference. in Frankfurt.

The monetary institution raised its inflation forecast for 2022 to 5.1 percent.

The rise in prices reached a record 5.9% annually in February in the euro zone, driven by energy and supply chain problems.

But “the upward impact could last for some time”, warned the former French finance minister, and it could affect goods whose prices change less frequently than those of energy.

Currently, the ECB estimates that inflation will fall to 2.1% in 2023 and 1.9% in 2024.

For its part, the growth forecast for the euro zone was revised downwards to 3.7% for this year, due to the impact of the armed conflict in Ukraine.

Regarding an increase in interest rates, Lagarde said that “they are not in a hurry” so any movement will be gradual and will only occur at “some time” after their bond purchase program ends, now scheduled for the third trimester.

“This maintains our traditional sequencing logic, but also gives us some extra headroom, if needed, after we stop buying bonds and before we take the next step toward normalization,” he said.

The central bank has said inflation, including core measures that exclude volatile components like energy and food prices, needs to stabilize at least 2% before raising rates.

Lagarde added that the body can devise new tools to ensure that monetary policy reaches all corners of the euro zone.

The ECB has created a series of monetary policy instruments that have helped reduce the spread between the financing costs of Germany and indebted countries such as Italy and Greece.



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