Stagnant inflation is not the most likely scenario for the eurozone, even when the war in Ukraine is slowing growth and accelerating inflation, according to European Central Bank President Christine Lagarde, according to Bloomberg.
“Stagnant inflation is not our main scenario at the moment,” Lagarde told the Slovenian newspaper Delo in an interview published today.
“While extreme uncertainty could slow economic growth accompanied by high inflation, the current situation cannot be compared to that of the 1970s.”
Central bankers are facing conflicting forces as Russia’s invasion pushes prices higher, while eroding business and household confidence. ECB officials are still determined to continue normalizing monetary policy, with many talking about the possibility of a first rate hike in July.
On Friday, Bundesbank chairman Joachim Nagel said policymakers should not wait too long to take such a step, while French ECB board member Francois Villeroy de Galhau said interest rates, currently at -0.5%, can be positive this year.
Lagarde reiterated that based on the available data, the asset purchase program (APP) is expected to be terminated “at the beginning of the third quarter”. Asked about interest rates, the ECB president said officials would keep “all options open” and move forward gradually.