Lagarde: Reacting by tightening policy doesn’t make sense

European Central Bank Governor Lagarde said: “It does not make sense to react by tightening policy while inflation pressure is expected to decrease.” said.

Christine Lagarde, President of the European Central Bank (ECB), made evaluations about the economic recovery and inflation in Europe in her speech at the “2021 European Banking Congress” held in Frankfurt.

Explaining that the ECB will continue to support the economy even after the “emergency” in the new type of coronavirus (Kovid-19) epidemic ends, Lagarde signaled that there will be no increase in interest rates next year, despite the current increase in inflation.

“As I recently explained, conditions for a rate hike are very unlikely to occur next year,” Lagarde said. made its assessment.

Lagarde said that it is necessary not to rush for monetary tightening as it may hinder the recovery in the economy and negatively affect household incomes. said.

Lagarde stated that inflation in the Euro Area may increase until the end of this year, and that the inflation dynamics in the region will decrease in the medium term.

Explaining that inflation was pushed upwards by the exceptional conditions created by the Kovid-19 epidemic, Lagarde stated that the nature of inflation may slow down the pace of economic recovery in the near term.

“We are sticking to the first of the three key elements of the ECB strategy, focusing on the medium term, not current inflation,” Lagarde said. This is because monetary policy affects the economy with a lag. Therefore, as it is today, it does not make sense to react by tightening the policy while the inflation pressure is expected to decrease. Compression will not affect the economy until the shock wears off.” used the phrase.

“Even after the Pandemic Emergency Purchase Program ends, it will still be important for monetary policy, including the appropriate adjustment of asset purchases, to support the recovery and the sustainable return of inflation to our 2 percent target. We will announce our intention on this in December,” said ECB President Lagarde. made its assessment.

The ECB launched the 1.85 trillion-euro Pandemic Urgent Asset Purchase Program (PEPP) in 2020 to support the economy with cheap money due to the Kovid-19 outbreak. The bank’s asset purchases under the PEPP are expected to continue until March 2022.

Experts predict that the ECB’s economic stimulus will not stop abruptly after the end of the PEPP and the bank’s asset purchase program will ensure the smoothest possible transition.

The ECB Governing Council will decide on the future of bond buying programs at its meeting on 16 December.


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Source: bigpara- GÜNDEM by bigpara.hurriyet.com.tr.

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