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ECB Moves To ‘Stamp Out’ Surging Inflation

President of the European Central Bank (ECB), Ms Christine Lagarde, said on Tuesday that the war in Ukraine had led to surging energy and food prices that are higher than those seen in the 70s and 80s and expressed the bank’s  readiness to combat soaring consumer prices with interest rate hikes in July and September.

Leading Britain Conversation, an online medium quoted the ECB president as saying, however, that the bank will keep its options open to “stamp out” inflation if it surges faster than expected.

Lagarde, in a speech opening an ECB forum on central banking in Sintra, Portugal, used strong terms as policymakers target inflation running at a record 8.1% in the 19 countries using the euro.

With new inflation figures due out on Friday, she said the bank was using the dual approach to be able to respond to economic uncertainty.

According to her, Russia’s war in Ukraine has led to surging energy and food prices that are higher than those seen in the 1970s and 80s, and “given its energy dependence, the euro area is experiencing these shocks acutely.

“The size and complexity of these shocks are also creating uncertainty about how persistent this inflation is likely to be”, Lagarde added.

Meanwhile, the bank has already announced it will end asset purchases that worked to boost the economy on Friday, and follow with its first interest rates hikes in 11 years at its meeting next month.

It will also raise rates in September but is leaving the option open for a bigger hike than the quarter-point increase in July, in case inflation keeps spiking.

The ECB president also hinted that the bank was also trying to avoid further hurting economic growth by acting too aggressively, having “revised markedly down our forecast for growth in the next two years.”

 

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