It was March 30, almost a month after the Russian invasion of Ukraine began. The president of the European Central Bank said: “the longer the war lasts”[it]the economic cost ser[aient] higher and the greater the chance of an adverse outlook will be[it] big “.
“With an appropriate policy response, we can mitigate the economic impact of war and deal with the great uncertainty we face”estimated at the same time Christine Lagarde.
Then define “stagflation” as “an ongoing recession in the economy and high inflation, which continues to rise”, the boss of the ECB was of the opinion that the latter could be avoided.
“The current situation cannot be compared with that of the 1970s”
While the unusual degree of uncertainty could mean a combined slowdown in growth and high inflation, the current situation is unlike that of the 1970s. she confirmed again to the Slovenian daily on May 7.
The scenario of “stagflation” is not “not our reference at the moment” continued Christine Lagarde. Admittedly, the oil shock had also collapsed the economy, but inflation was much higher than it is today. Mainly because, unlike fifty years ago, “we don’t see (…) today” wage increases in response to inflation.
this war “is above all a human tragedy” who has too? “economic consequences outside Ukraine” : she “weighs growth and fuels inflation”, insisted Nicolas Sarkozy’s former economy minister.
Europe’s economy is de facto stagnant, says another
It also does not say whether the European institution based in Frankfurt, Germany, will increase its key rates. And even though there is a timid growth of 0.2% in the first quarter of 2022, the European economy “de facto stagnant”, said Fabio Panetta, member of the Executive Board of the ECB, in an interview with the Italian daily La Stampa 5th of May.
This context of slow growth and rising prices “makes choices more difficult” guardians of the euro, because “Monetary tightening to contain inflation would ultimately slow down already weakened growth,” predicted the latter, ranked among the “pigeons” adept at supporting policies for the economy, in resistance to “hawks” who favor incoherent policies.
Comments that contrast with those of two of the most eminent members of the Governing Council of the European Central Bank, who are more voluntary, and underline the differences in valuation within the European Central Bank. “I think a rate increase is possible in July”, Isabel Schnabel had supported in a daily interview Handelsblatt released on May 3.