ECB: Lagarde and short-term inflation risks emphasis


ECB President Christine Lagarde, in her statement at the press conference of the regular monetary policy meeting, said that the risks to the Eurozone inflation outlook are on the upside in the near term. Highlights from Lagarde’s speech;

The Ukraine war placed a heavy burden on trust. Trade cuts lead to new famines. Rising energy prices reduce demand and production. The extent of these effects depends on the evolution of the conflict.

The recovery in the economy accelerated with the reduction of the Covid-19 pandemic.

Inflationary pressures intensified in many sectors.

Growth will remain weak in the first quarter of 2022. The ECB expects slow growth in the coming period.

New pandemic measures in Asia add to supply chain problems.

Post-pandemic sector reopening and strong labor market revenues will support it.

Inflation is mainly driven by energy. But inflation has become more common. The increase in core inflation is uncertain.

The labor market is developing further. But wage growth generally remains muted.

Risks to the economic outlook are on the downside. Downside risks have increased significantly.

Within the framework of Lagarde’s inflation reference, we observe that the ECB follows the high inflation phenomenon intensively, as current risks are added through the previous monetary policy communiqué. The risk of recession has increased significantly due to the Russia-Ukraine war, but the risk of inflation has also increased significantly and will affect economic growth when it appears to undermine consumption. As a result, supportive monetary policies are not considered as beneficial as before.

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