Christine Lagarde rules out stagflation in the eurozone

The ECB President believes that the current situation cannot be compared with that of the oil shock of the early 1970s.

The chairman of the European Central BankChristine Lagardeestimated on Saturday that theinflation high combined with permanent stagnation is not the “referencewhat the institution leans for, fueling debate ahead of an imminent first rate hike. †While the unusual degree of uncertainty could mean a combined slowdown in growth and high inflation, the current situation is not comparable to that of the 1970s.says Christine Lagarde in an interview with the Slovenian daily Delo

In addition, there had been a spiral of wage increases in response to inflation, fueling it, which “we don’t see (…) todayshe added. His message temporarily interrupts a series of communications in the circles of central bankers in the eurozone, where everyone has spent the past week giving their sense of the right time to decide on a first rate hike.

This will be an important step in the ongoing process of normalizing accommodative monetary policies in response to crises, especially those related to Covid-19 from 2020 onwards. The Institute has already gradually withdrawn its repayments on huge amounts of debt. launched in 2015 to combat under-inflation. These redemptions must be reduced to zero (in net)”at the beginning of the third trimester” said Christine Lagarde, and the policy rate adjustments “will take place some time later and will be gradual.” This leaves open the possibility to debate a first rate hike – since 2011 – during the last monetary policy before the summer holidays, which will take place on Monday. July 21 is scheduled, as proposed by several members of the ECB, such as Isabel Schnabel, member of the Governing Council.

The guardians of the euro have to decide mainly according to the evolution of the war in Ukraine. this war”is above all a human tragedy” That one as well “economic consequences outside Ukraine” : she “weighs on growth and fuels inflation‘ insisted Christine Lagarde.