ECB can’t just mirror Fed moves, says Lagarde

The European Central Bank (ECB) needs to be mindful of the Federal Reserve’s monetary policy decisions, which influence global markets, but cannot just mirror their movements, ECB President Christine Lagarde said on Thursday. after the Fed indicated further rate hikes.

The Fed raised its interest rate another 75 basis points on Wednesday and Chair Jerome Powell said the battle against inflation will require borrowing costs to rise “more than previously expected”, prompting investors to price in. more ECB highs as well.

But Lagarde said the ECB, which raised rates by 75 basis points last week, cannot simply imitate the Fed because economic conditions are different for the 19 euro zone countries, a point previously underlined by the ECB’s board member. bank, Fabio Panetta.

“We have to be aware of possible repercussions,” Lagarde said at a conference in Riga. “We are not the same and we cannot progress at the same pace (or) under the same diagnosis of our economies.”

Lagarde admitted that the ECB was “influenced by the fallout” of the Fed’s action through financial markets and especially the euro’s exchange rate, which was falling against the dollar on Thursday.

“Clearly the exchange rate is important and should be factored into our inflation projections,” said Lagarde.

In his own speech, Panetta said the eurozone was more vulnerable than the United States to a global economic slowdown and higher energy prices, and that the Fed’s own monetary tightening was already taking its toll, meaning the ECB needs to be cautious.

But other members of the Governing Council continue to take a more aggressive view.

Speaking alongside Lagarde, Latvian central bank governor Martins Kazaks said interest rates needed to rise “much more” and that there was no need to pause increases at the turn of the year.