According to its President Christine Lagarde, the European Central Bank (ECB) will not initiate an abrupt change of direction. “Any adjustment to our monetary policy will be gradual,” Lagarde said on Monday in the European Parliament in Strasbourg. She also advocated that monetary authorities should be more flexible than ever given the current uncertainty. “Our monetary policy is always data dependent and this is all the more important in the situation we are facing right now,” said the central bank governor.
There had recently been more and more interest rate speculation on the stock exchanges. There it was even assumed that interest rates would rise by 50 basis points by December. The last time the ECB raised interest rates was in 2011. At the beginning of February, Lagarde opened the door to a possible rate hike later this year. In view of the current surge in inflation, after the most recent interest rate meeting, she no longer repeated her earlier assessment that a turnaround in interest rates in 2022 was very unlikely.
In front of the MPs, Lagarde now confirmed that interest rate hikes will only take place after the end of the bond purchases. “A rate hike will not happen until our net bond purchases end,” she said. And for that, according to Lagarde, conditions must be met. These are intended to ensure that interest rates are not raised prematurely.
Lagarde pointed out that the monetary watchdogs will have new economic and inflation forecasts from the ECB economists at the interest rate meeting in March. The euro watchdogs would then be in a better position to assess the consequences of the latest surge in inflation. Inflation in the euro zone surprisingly climbed to a new record of 5.1 percent in January. This is the highest value since statistics began in 1997.