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Lagarde says the ECB will not be rushed if officials act to contain prices

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The European Central Bank will not be rushed to withdraw monetary stimulus as officials act to curb inflation, which is nearly four times its 2 percent target, President Christine Lagarde said.

I don’t think we’re in an increasing demand situation right now,” she told Francine Lacqua on Tuesday on Bloomberg Television from the World Economic Forum in Davos, Switzerland.

“It’s definitely inflation fueled by the supply side of the economy. In this situation we obviously have to move in the right direction, but we don’t have to rush and we don’t have to panic.”

Ms Lagarde spoke a day after she blogged about her vision for the central bank’s next steps. The ECB is expected to end negative monetary policy by the end of the third quarter, with a first rate hike planned for July, she said.

That prospective timeline, which announces two quarter-point rate hikes in the third quarter, has angered some colleagues because it would effectively rule out a half-point hike, according to people familiar with the matter.

Some officials, including Bank of France chief Francois Villeroy de Galhau, have also hinted that the ECB could end the year with positive interest rates.

Traders are betting on four 25 basis point hikes by the ECB by the end of 2022.

“When you’re no longer negative, you can be at zero, you can be slightly above zero,” Ms. Lagarde said. “This is what we will determine based on our projections based on our forecast.”

Lagarde declined to comment on whether the central bank might consider a 50 basis point move.

Policymakers walk a fine line as Russia’s invasion of Ukraine has sent prices soaring while shattering business and household confidence.

New Covid restrictions in China put additional strain on supply chains.

However, the ECB President downplayed the risk of an economic contraction, saying “at the moment we do not see a recession in the euro area”.

She cited unemployment “at its lowest levels”, large household savings and the prospect of a strong summer for the tourism industry as forces that will offset adverse shocks from the war and push inflation to record levels.

The euro jumped on Ms Lagarde’s comments, recouping earlier losses against the US dollar to hit a one-month high around $1.0736 and rallied against other currencies including the Swiss franc and sterling.

https://www.independent.ie/business/world/lagarde-says-ecb-wont-be-rushed-as-officials-act-to-curb-prices-41682187.html Lagarde says the ECB will not be rushed if officials act to contain prices

Fry Electronics Team

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