Frankfurt, Germany (AFP) – The president of the European Central Bank highlighted the bank’s determination to fight rampant inflation through Other interest rate hikes in addition to all-time highssaying on Friday that “our work is not finished” and that even a small recession would not be enough to bring price rises under control.
President of the European Central Bank, Kristine Lagarde “We will not allow high inflation to take hold,” allowing forecasts of higher prices to shift to wages and costs, he said at a conference at the Estonian central bank, resulting in The spiral swells higher than ever.
He said central bankers must be “prepared to make the necessary, albeit difficult, decisions to bring inflation down, because very high inflation would have far worse consequences for everyone.”
Lagarde noted that the rapid pace of growth in the bank’s benchmarks at meetings on July 21, September 8 and October 27 did not put an end to the efforts to stifle. Inflation hit a record high of 10.7%. 19 countries use the euro, as the European Central Bank defines monetary policy.
After Thursday’s speech in Latvia, Lagarde stopped off in Estonia. In the neighboring countries of Estonia, Latvia and Lithuania, inflation is the highest in Europe, over 20%, and causes further difficulties in the countries where people live. They spend more than their income on food and fuel – 40% compared to 26% in the rest of the eurozone, according to data from the Central Bank of Latvia.
The European Central Bank has raised interest rates by a total of two percentage points since July, the fastest pace since the introduction of the euro in 1999. The bank’s position reflects the position of the US Federal Reserve, which Raise interest rates by three quarters The fourth consecutive meeting on Wednesday, e The Bank of England raised interest rates by the same amount Thursday.
Central banks fight inflation by raising interest rate standards, which shift the cost of credit across the economy. Higher rates make credit more expensive, which curbs consumption and investment and reduces demand for goods, putting downward pressure on prices. However, rising interest rates also raise concerns about the impact on economic growth.
The rise in prices in Europe was determined Russian invasion of Ukrainethe one sent Rising natural gas prices later, later Russia has cut off most of its supplies for the continent. The recovery in demand after the worst period of the pandemic, as well as bottlenecks in the supply of parts and materials, also played a role.
The realignment of supply chains, with some companies trying to locate supply and production in countries considered less vulnerable to wars or political unrest, can also drive up prices as safety takes priority over cost reduction.
Inflation has robbed consumers of purchasing power and has led many economists to expect a recession later this year and early next.
Lagarde said “the risk of a recession has increased” despite growth in the third quarter coming in at 0.2% higher than expected in the previous three months. However, slowing growth alone will not be enough to bring prices down due to weak demand, he said, citing the experience of previous recessions, which suggests that we shouldn’t expect slower growth to have a significant impact on inflation. , at least not in the next term. “. concept.”
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