Monday, August 8

Lagarde castles herself on her thesis that inflation is temporary

All eyes were on Thursday at the press conference of the president of the European Central Bank (ECB), Christine Lagarde, after learning that inflation in Spain reached 5.5 percent, the highest level in 29 years, and that in the euro area climbed to 2.1 percent.

Nevertheless, the directive once again insisted that the price escalation is temporary in nature. Thus, he pointed out that inflation in the euro area will increase this year, but he expects it to decline in the following year. “The pressure of inflation should be reduced in 2022,” he said.

At the same time, it welcomed that financing circumstances remain favorable.

“We have debated a lot and done a great analysis. And we believe that our analysis that inflation will be transitory is correct“, Lagarde has defended himself. Yes he has recognized in any case that energy “is the main risk” and has indicated that if it continues to rise “it could be a brake on the recovery.”

Maintains forecasts

Lagarde pointed out that the risks to the economy are fully balanced. This will allow the eurozone economy to reach its pre-pandemic level before the end of the year.

A Despite rising inflation and the possibility of an economic slowdown, or even stagnation, Lagarde has ruled out stagflation.

However, he showed his intention to maintain the pandemic purchasing program, known by its acronym in English as PEPP until March 2022.

The ECB keeps monetary policy unchanged

The ECB decided to keep its monetary policy unchanged. A) Yes, left interest rates unchanged at 0 percent, level at which they have been anchored since March 2016.

There were also no changes in the deposit rate, which is the amount charged to banks for having the money in the ECB, at -0.50 percent.

The October meeting is transitional until December, where the ECB will reassess the European economy and could announce the volume of reduction in purchases.