A rapid turnaround in interest rates, as will soon be the case in the USA, is not an issue for the ECB

The ECB President assumes that prices will stabilize in 2022.  Source: Reuters
Christine Lagarde

The ECB President assumes that prices will stabilize in 2022.

(Photo: Reuters)

Paris Despite the current high level of inflation, a rapid turnaround in interest rates is out of the question for the ECB, according to its President Christine Lagarde. The European Central Bank does not have to be as aggressive in monetary policy as the US Federal Reserve is likely to do, Lagarde told French radio station France Inter on Thursday.

“The cycle of economic recovery in the US is ahead of that in Europe,” said the Frenchwoman. “So we have every reason not to act as quickly and ruthlessly as one might imagine with the Fed.” She assumes that prices will stabilize in 2022 and that there will be a gradual decline.

Financial markets are expecting the Federal Reserve to hike rates in March and up to three more hikes this year. However, Lagarde has repeatedly stressed that an interest rate hike in the euro area this year is very unlikely.

Inflation in the euro zone surprisingly rose to another record high in December. Driven by expensive energy, goods and services cost an average of 5.0 percent more than a year earlier. Inflation is thus well above the ECB’s target. The central bank is aiming for a rate of 2.0 percent in the medium term.

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