Lagarde: Rising interest rates are coming, but we will maintain our flexibility

The end of zero interest rates in the euro area with successive interest rate hikes in the coming months in order to deal with the inflation rally was confirmed by the President of the European Central Bank, Christine Lagarde, speaking at the press conference, after decisions of the central bank.

Christine Lagarde said the central bank was planning a first rate hike of 25 basis points at its July meeting, and for the next meeting in September left the door open for a further increase if needed.

“We have decided today to take new steps to normalize our policy,” Lagarde said, adding that “we will maintain our choice, our gradual change and our flexibility in our monetary policy.”

“The latest forecasts are that inflation will remain at unwanted levels for longer, at a time when Russia’s unwarranted attack on Ukraine continues to weigh on the European economy,” she said.

“We had a very productive debate today and our decisions were unanimous. We have paved a path and the July and September meetings are the first steps on the road to raising our interest rates,” he added.

“If the outlook for inflation remains as it is today or worsens, we expect the increase to be greater in September. Then we expect new increases. [των επιτοκίων] will be necessary, based on the data we have today on the outlook for inflation. ”

The pressure will continue

The ECB President also noted that in the short term economic activity will continue to be under pressure as the war in Ukraine and the lockdowns in China create serious disruptions in the global supply chains.

Support for the economy, on the other hand, is provided by the strong labor market, as well as compensatory fiscal measures and the ability of households to use the savings that have accumulated during the pandemic. Investments under the Next Generation EU program also give an additional impetus.

Uncertainty has skyrocketed

The ECB President also stressed that the central bank is forced to operate in an environment of unprecedented uncertainty. “The huge rise in energy prices due to the war in Ukraine has taken all analysts by surprise. All the international institutes have made the same mistake, to underestimate or to lose in their forecasts some of the developments of recent months,” he said.

Lagarde warned, however, that world energy prices would remain high in the short term, while food prices would remain on an upward trajectory.

D. Stolis