The president of the ECB does not see likely increases in interest rates in 2022




The President of the European Central Bank (ECB),
Christine Lagarde, considers that a rise in interest rates
in response to aA temporary escalation in inflation would mean a premature tightening of conditions which would add an unjustified drag on the recovery of the Eurozone, so he does not believe that throughout 2022 the necessary circumstances will take place to make this decision.

“It is highly unlikely that the conditions for raising rates next year will be met,” Lagarde reiterated in a speech at a banking conference in Frankfurt, where he noted that, even after the end of the pandemic emergency, it will remain important that monetary policy supports the recovery and sustainable return of inflation to the 2% target.

In this sense, he has argued that to return inflation to that goal in a sustainable way when interest rates are close to the effective lower limit, the ECB must be “persistent in its monetary policy” and it should not rush into premature tightening in response to transitory or supply-driven inflationary shocks.

“At a time when purchasing power is already being reduced by rising energy and fuel bills, an undue adjustment would represent an unjustified headwind for recovery, “said the French, for whom raising rates prematurely” would only worsen this pressure on income “without addressing the root causes, because energy prices are set globally and supply bottlenecks escape to ECB policy.

“We recognize that higher inflation puts pressure on people’s real incomes, especially those at the bottom of the income distribution,” he has admitted, although he has argued that the underlying drivers of inflation are likely to fade in the future. medium term, which is the horizon that matters for monetary policy.

“This is partly because monetary policy hits the economy with a lag. So, when inflationary pressure is expected to decrease, as is the case today, it makes no sense to react by tightening the policy, since the adjustment would not affect the economy until after the shock has passed, “he explained.

In this way, Although it has called the meeting of the Governing Council of the ECB next December In order to know the intentions of the central bank, he has expressed his confidence that if he is patient and persevering now, the conditions for raising rates in the future will finally be met, although he does not believe that this will happen in 2022.

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