“Significant” economic risks increase with war – POLITICO

FRANKFURT – Russian aggression against Ukraine will push up inflation in the short term and pose significant risks to the euro zone’s growth prospects, European Central Bank President Christine Lagarde warned The Wednesday.

She identified three main factors likely to push up inflation: higher energy prices; higher food prices due to Ukraine’s key role as a wheat exporter; and renewed bottlenecks in global supply chains.

“At the same time, the war poses significant risks to growth,” Lagarde added. She pointed to the bad sentiment, suggesting consumers may scale back their purchases while businesses are shelving investment.

“Europe is entering a difficult period,” said Lagarde. “There is significant uncertainty as to how large these impacts will be and how long they will last.”

Amid the uncertainty, the ECB is poised to revise both the size and duration of its asset purchase program, which is currently set to end after the third quarter.

In any case, the ECB will only proceed gradually in its efforts to normalize monetary policy in the face of raging inflation, she said.

“Incremental means that we proceed cautiously and adjust our policy as we receive feedback on our actions,” Lagarde said. “Any adjustments to the key ECB interest rates will come some time after the end of our net purchases under the ECB [bond-buying program] and will be gradual.” "Significant" economic risks increase with war - POLITICO

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