“Our work is not done yet.” Is “we have to remain vigilant”Given the risks that inflation could rise again in the euro zone, warned Christine Lagarde on Monday, at the opening of the ECB Forum held every year in Sintra. Quoting the late football coach Bobby Robson, Lagarde stressed that “the first 90 minutes [do jogo] They are the most important” and guaranteed that the central bank “He will not rest until he wins the game.”and inflation returns to 2%.
In the opening speech of the ECB Forum (which, unlike previous editions, took place on the afternoon of the first day, instead of the morning of the second), Christine Lagarde welcomed the measures that the ECB had adopted in the recent times. years. “Our monetary policy decisions were successful to keep inflation expectations anchored [ou seja, controladas] and the rate of Inflation should return to 2%. in the second half of next year,” said the Frenchwoman, adding that “taking into account the severity of the inflationary shock that existed, this correction [das pressões inflacionistas] Is remarkable“.
After starting to raise interest rates in July 2022, when they were at a negative value of -0.5%, the ECB proceeded with the fastest hike in its history, raising them to 4% in September 2023. After that, several months of stabilization and, last month, the first interest rate cut of this cycle was announced. In this opening speech of the annual Forum, the president of the ECB brought with her new data (analysis carried out by the ECB itself) that demonstrates that “If we had not intervened, the risk of decoupling [das expectativas de inflação] would have been over 30% in both 2023 and 2024“.
When central banks talk about “unanchoring” inflation expectations, they are referring to the risk of generating an untamable inflationary spiral that puts the credibility of the central bank and, ultimately, the currency itself at risk.Even if we had had a moderate response, such as stopping interest rate hikes at 2%, the risk of deanchoring would still have been close to 24%.“Lagarde stated, to justify the aggressive increase in interest rates to double that level.
The ECB admits, however, that this sharp increase in interest rates brought “costs” to the economy and the lives of many people. “While our decisions helped control inflation, they also slowed economic growth,” including economic stagnation. [na zona euro] which lasted for five consecutive quarters.
However, congratulates Christine Lagarde, “this time, the The costs associated with the disinflation process were slight., compared to other episodes in the past.” One “Soft landing”, a term used by central banks to refer to a process of raising interest rates without excessively penalizing the economy,”it’s not a fact yet“, but the indicators are positive, especially the “exceptionally” benign behavior of the labor market.
As for the future, the ECB continues to see “Several reasons for uncertainty about future inflation.“especially since there is a risk of further “supply shocks”, such as those related to energy, which contributed to the inflationary outbreak of 2021/2022. “It will take some time before we can gather enough data to be able to say with certainty that the risks of above-target inflation have been overcome,” underlines the ECB President.
Source: Observadora
