European Central Bank President Christine Lagarde made clear Sunday that the European Central Bank’s rate hike will not reduce the prices of energy resources that cause half of inflation in the European continent, despite pressures faced by the European financial institution to raise interest rates.
“Inflation in Europe is currently very high. 50% of it is related to the prices of energy resources,” and Russia’s war in Ukraine “significantly raised these prices,” Lagarde said during an interview with CBS.
“If I raise interest rates today, it will not lower the price of energy resources,” she added.
Central banks from around the world began to raise interest rates in the face of inflation, with the aim of increasing the cost of credit to slow consumption, and thus reduce pressure on prices.
Lagarde again defended the position of the European Central Bank (ECB) to gradually roll back its accommodation policy aimed at supporting the Eurozone economies during the crisis.
“We will boycott asset purchases during the third quarter of the year, with a high probability that we will do so in the early third quarter,” said French Lagarde, who attends financial meetings in Washington. “Then we will look at interest rates and how to raise them.”
She stressed that the separate policies adopted by the United States and Europe in the face of the Covid-19 pandemic led to a different nature of inflation on both sides of the Atlantic.
Inflation reached 7.5% in March 2022 in the euro area and 8.5% in the United States.
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