HS Interview President Christine Lagarde The ECB Should Have Noticed The Acceleration Of Inflation Earlier We Must Learn A Lesson She Says To HS

Monetary policy in the euro area is approaching a crossroads soon The European Central Bank (ECB) will have to consider slowing down interest rate hikes and perhaps ending them by the fall.

Director General Christine Lagarde is relieved about one thing Based on new forecasts, the energy crisis will not push the euro area into recession.

The International Monetary Fund (IMF) predicts that the economy will grow by 0 7 percent this year, and the European Commission by 0.

9 percent He is concerned that the increase in consumer prices, i.

E Inflation, Is Still Very Fast

That's why the ECB announced, in an exceptionally straightforward manner, about three weeks ago that it intends to tighten Monetary policy significantly, i e.

By 0 50 Percentage Points In March

The CEO bluntly announces that he does not predict how much Monetary policy will need to be tightened after March In the financial markets, it is considered almost certain that the ECB will continue raising interest rates at least until the summer.

“I don't stare at my navel or read a crystal ball I want to see new information and listen to the views of my colleagues when they have the same new information at their disposal.

We make our decisions on this basis One thing is still certain: we want to return inflation to two percent with timely measures.

" Read more: IMF predicts economic headwinds will subside and urges central banks to continue raising interest rates Central bankers never confirm future Monetary policy decisions because they are influenced by many factors They speak with tongue in cheek, because even a single word can swing the market.

Due to the CEO's slightly crooked answer, it is worth asking the same question about interest rate hikes after March, worded in a different way So is it out of the question that there will be another 0.

50 percentage point interest rate increase after March? "Our decisions are always influenced by new information, and our guideline is the effort to return inflation to two percent " The French lawyer started as central bank governor in November 2019.

Before that, he worked as the head of the International Monetary Fund (IMF) Madame Lagarde seems exactly what many have said: charismatic, relaxed and humorous.

He has also learned the ambiguous "central bank language" He visited Finland this week because the meeting of the council that decides on Monetary policy was organized in Inari at the Sámi cultural center Sajos.

During her visit, Lagarde stayed at the premises of the Bank of Finland in Saariselkä No actual Monetary policy decisions were made in Inari, but they will be discussed on the 16th.

March in Frankfurt The central bank's main concern is inflation.

According to the ECB's price stability objective, inflation should be two percent in the medium term Overall inflation is still far too fast, but it will probably slow down due to lower energy prices, says the CEO.

In January, overall inflation slowed to 8 6 percent.

It was sharpest in October, when consumer prices rose by 10 6 percent from the same time last year.

The continuation of the acceleration of core inflation in January was worrisome "Crude oil and natural gas prices have already fallen to the level before the coronavirus pandemic.

Core inflation, which excludes the effect of energy and food prices, is still faster than ever before: 5 3 percent in the euro area in January.

"The energy crisis pushed the Eurozone economy into a corner tunnel last year In the fall, inflation accelerated faster than ever before and economic growth came to a standstill.

Fortunately, the darkest threats did not materialize CEO Lagarde thinks it is likely that the eurozone will avoid recession, even though the outlook is dim.

However, nothing is completely certain, and forecasting the economy is notoriously difficult "However, the uncertainty is great, and one key question is in which direction the war will develop.

Another big question is how the lifting of restrictions related to the coronavirus pandemic will affect China's economic recovery and the global economy Salary negotiations and fiscal support are also important.

" The central bank has warned many times recently about large salary increases because they can accelerate inflation According to Eurostat, the Statistical Center of the European Union, wages rose by 2.

9 percent in July–September from a year ago It is possible that at the end of the year the salaries have risen significantly more.

If employees receive large wage increases, companies' labor costs increase, forcing them to raise the prices of the goods and services they sell The result is an acceleration of inflation.

According to CEO Lagarde, the surprising tenacity of the eurozone economy on the brink of recession is the result of many things "The euro area has benefited from a warm winter, which is not a good thing, because it is an indication of the progress of climate change.

Energy saving measures and solidarity between the countries of the euro zone have also had their own effect " By solidarity he means joint actions, who have opposed the war of aggression started by Russia in Ukraine.

"Europe has responded with common means to President [Vladimir] Putin's unjustified and illegal war Europe no longer buys Russian oil, and gas imports from Russia have decreased drastically.

Countries like Germany, Austria, Finland and Estonia have worked together to secure energy supply Such actions are demonstrations of solidarity against the consequences of this terrible war.

” Last fall, Finland and Estonia agreed that a tanker acting as a storage for liquefied natural gas would be placed in Inkoosee Gas from Inkoo is delivered under the same conditions to Estonia as to Finland.

Germany and Austria also cooperate in the procurement of liquefied natural gas Everyone is fallible.

In September, Director General Lagarde unequivocally announced, that there have been errors in the European Central Bank's inflation forecasts The central bank repeated for a long time that inflation is temporary.

That might have been the case if Russia hadn't attacked Ukraine a year ago, which caused chaos in the energy market According to CEO Lagarde, the central bank should perhaps have detected signs of an acceleration of inflation a little earlier and recognized that it is not temporary.

"We are currently developing our forecasting models further so that we can better take into account new factors that can be difficult to include in the models There was no way we could have modeled the Russian attack on Ukraine or the production bottlenecks caused by the coronavirus pandemic.

So we need to develop our forecasts and learn from them A few ECB Council members are involved in this project, one of whom is Chief Economist Philip Lane.

” Some economists have suspected that the failure of the forecasts led to an increase in key interest rates only in July 2021 The US central bank raised its key interest rate for the first time in March, but it was also affected by concerns about the economy overheating.

There are no signs of that in the euro area "Most economists and research institutes initially expected that the rapid inflation would be temporary and would slow down over time.

However, inflation spread more widely to several products and services I'm not sure it would have made much of a difference if we had started raising rates three months earlier.

The most important thing now is that we consistently stay on the line we have chosen " Another big question, whether the central bank's emergency financing, which was started due to the worsening of the coronavirus pandemic, should have been terminated earlier, as increasing the money supply usually accelerates inflation over time.

Especially when, at the same time, the states also revived strongly “If we hadn't done all this, you'd be asking me much harder questions: why the monetary stimulus wasn't extended longer and why we didn't prevent financial market instability by increasing the money supply.

I think that in order to secure economic recovery, it was better to err on the side of doing too much than too little " Read more: Everything is getting expensive - What if central banks and politicians are to blame? In 2020, fiscal policy and Monetary policy were strongly stimulating.

The central bank started to buy again the bonds of euro countries from the market, which ensured low-cost fundraising for the states "Governments had to make fiscal policy decisions to support the economy and avoid its collapse and to prevent bankruptcies and large job losses.

We are reacting to the price and financial stability risks caused by the pandemic by launching a new purchase program and offering targeted credits " However, the current inflation is due to a different reason.

That's why the ECB stopped emergency financing and raised key interest rates In order to tame inflation in the euro area, Monetary policy and fiscal policy would need to work together.

When the central bank tightens Monetary policy in order to slow down inflation, it does not make sense for states to speed up inflation with too light a fiscal policy According to him, there is a clear risk that Monetary policy and fiscal policy will have opposite effects.

"The economy of the Eurozone is now in a much better position than last year, but we have no reason to be complacent in the energy issue or inflation Achieving a balance between Monetary policy and fiscal policy requires a delicate balancing act.

The most important thing now is that fiscal policy does not fuel inflation, which would require a tighter Monetary policy " If everything goes according to the forecasts, inflation will begin to slow down considerably next year.

This raises the question of whether it is possible that Monetary policy easing will begin next year “As I said, I'm not going to predict our Monetary policy decisions.

I am waiting for the new forecast from our economists, after which we will go through it carefully and draw the necessary conclusions, which also take into account the latest information We need to make sure that that inflation will return to two percent and the change will be sustainable enough so that we can be sure of achieving our goal.

" The ECB economists' new economic forecast will be published in March on the same day that the Council announces its Monetary policy decisions Central bankers are often called hawks and doves.

The hawks emphasize keeping inflation moderate Doves, on the other hand, emphasize reducing unemployment more than moderate inflation.

CEO Lagarde considers herself neither a hawk nor a dove, but an owl "I'm definitely an owl because they can look almost 360 degrees in different directions.

The task of the European Central Bank is to achieve the goal of price stability My task is not only to get a comprehensive understanding of the economic situation, but also to take into account all the views around the ECB Council table.

"The owl is also a reference to wisdom In Roman mythology, the owl always accompanied Minerva, the goddess of wisdom.

"I have to understand how my colleagues see the situation both at the level of the euro area and at the level of individual countries and help them make the right decisions in order to achieve the goal of price stability " He rejects the idea that the governors of the central banks of the less indebted euro countries are hawks and the doves of the more indebted ones.

"The beauty of the entire Eurosystem is that people sit at the same table with their own views and with an open mind Everyone usually has to flex their preconceived notions a bit to reach a consensus.

The Governor of the Bank of Finland, Olli Rehn, is skilled at coordinating different views I don't know if he's an owl, but at least he might well be.

"Gross domestic product, which measures the standard of living in Finland, has not grown in ten years Economists are almost unanimous that the economy's infancy is caused by the weak growth of labor productivity.

Director General Lagarde agrees with the view "Improving labor productivity is one of the key issues that Finland and many other eurozone countries should focus on.

Key ways to improve productivity are ensuring the supply of skilled labor, investing in training and promoting innovation And as if out of politeness, he also mentions Nokia.

"I hope to see a new Nokia emerge from this beautiful country of 5 5 million inhabitants, producing advanced and beautifully designed phones.

" that the economy's infancy is due to the weak growth of labor productivity Director General Lagarde agrees with the view.

"Improving labor productivity is one of the key issues that Finland and many other eurozone countries should focus on Key ways to improve productivity are ensuring the supply of skilled labor, investing in training and promoting innovation.

And as if out of politeness, he also mentions Nokia "I hope to see a new Nokia emerge from this beautiful country of 5.

5 million inhabitants, producing advanced and beautifully designed phones " that the economy's infancy is due to the weak growth of labor productivity.

Director General Lagarde agrees with the view "Improving labor productivity is one of the key issues that Finland and many other eurozone countries should focus on.

Key ways to improve productivity are ensuring the supply of skilled labor, investing in training and promoting innovation And as if out of politeness, he also mentions Nokia.

"I hope to see a new Nokia emerge from this beautiful country of 5 5 million inhabitants, producing advanced and beautifully designed phones.

" Key ways to improve productivity are ensuring the supply of skilled labor, investing in training and promoting innovation And as if out of politeness, he also mentions Nokia.

"I hope to see a new Nokia emerge from this beautiful country of 5 5 million inhabitants, producing advanced and beautifully designed phones.

" Key ways to improve productivity are ensuring the supply of skilled labor, investing in training and promoting innovation And as if out of politeness, he also mentions Nokia.

"I hope to see a new Nokia emerge from this beautiful country of 5 5 million inhabitants, producing advanced and beautifully designed phones.

".