Inflation: “We’ll do whatever it takes”
The President of the European Central Bank, Christine Lagarde, pledged that the institution would “do whatever it takes” to stop spiralling inflation.
Addressing the annual European Central Bank Forum at Penha Longa in Sintra on Monday, she said tough measures were required to stop inflation remaining “undesirably high” in the medium term.
However, Lagarde played down the risks of recession, saying that the ECB is ready to “move faster” on internet rates if needed.
The ECB is trying to calm investor jitters over high inflation caused by the economic consequences of the Covid-19 pandemic, Russia’s war in Ukraine, and spiralling energy and raw materials costs.
In a haunting echo of the Sovereign Debt Crisis 10 years ago, investors are also concerned over high levels of public debt in Southern European countries such as Greece, Italy, Spain and Portugal.
However, a return to tighter monetary policy could become a financial constraint for these economies.
European Central Bank top brass were in Portugal this week for their annual conference which is focusing on the rising cost of living crisis for consumers as inflation in the Euro Zone is forecast to hit 6.8% this year, which is above the ECB’s target of 2%. Portugal’s inflation currently stands
It comes at a time when economists are assessing whether or not the Euro Zone will avoid a recession this year as GDP levels have suffered as a result of the energy crisis, sanctions on Russia, and the food crisis.
With inflation at 8.1% in the Euro Zone in May, the ECB announced three weeks ago that it would increase interest rates by 25 base points at its meeting on 21 July – the first increase in over 10 years.
“If the medium term outlook on inflation deteriorates, we will set a more appropriate rate (i.e., higher) at our next meeting in September”, she said.