ECB President
Lagarde: Inflation will weaken again
The ECB President Christine Lagarde is campaigning for confidence in the course of the European Central Bank. Photo: Boris Roessler / dpa
© dpa-infocom GmbH
Many consumers are concerned about rising inflation rates. The calls for countermeasures by the European Central Bank have become louder. However, ECB President Lagarde is dampening expectations.
Europe’s top monetary guardian Christine Lagarde is trying to gain confidence in the course of the European Central Bank (ECB) in the face of rising inflation rates.
The current comparatively high inflation rates worried many people, said the ECB President in an interview with the “Frankfurter Allgemeine Sonntagszeitung”. “But we expect that this rise in inflation will not last. This will calm down again next year. As early as January we expect inflation rates to begin to fall, ”said Lagarde in the interview, from which the newspaper quoted excerpts in advance on Friday.
The inflation rates have been climbing for months. The harmonized consumer price index HICP, which the ECB uses for its monetary policy, was 4.6 percent above the level of the same month last year in Germany in October. The Bundesbank believes it is possible that the HICP rose to just under 6 percent in November. In the euro area, too, the inflation rate of 4.1 percent in October was well above the medium-term target of 2 percent set by the ECB.
The ECB explains the sudden increase primarily with special factors that should weaken in the next year: for example, the recovery in oil prices after the corona shock and delivery bottlenecks as a result of increased demand. In addition, the withdrawal of the temporary VAT cut is currently having an impact in Germany.
Higher inflation weakens purchasing power, and consumers can then buy less for one euro than before. Critics accuse the ECB of fueling inflation with its monetary policy because the central bank is pumping billions into the markets through bond purchases. In addition, the ECB has kept interest rates at a record low for years.
“If we realize that inflation will reach our target of two percent in the medium term, permanently and sustainably, not just for a short time, then interest rates can rise again,” said Lagarde. The ECB President currently considers a discussion about higher interest rates to be inappropriate. “If we tightened monetary policy now, we would probably have an effect in 18 months,” Lagarde told the newspaper. “That is how long the delay will be before our monetary policy measures take effect. By then, however, according to our forecasts, inflation would have fallen again a long time ago. We would cause unemployment and high adjustment costs, and yet we would not have combated the current high inflation. “