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ECB should not react to current inflation spike: Lagarde -Breaking

by Mike Robinson

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© Reuters. FILE PHOTO. Christine Lagarde, President of European Central Bank (ECB), speaks at a news conference about the outcomes of the Governing Board meeting in Frankfurt, Germany on October 28th, 2021. REUTERS/Kai Pfaffenbach/File Photo

FRANKFURT, (Reuters) – Inflation will recede so the European Central Bank shouldn’t tighten its policy because it could choke off recovery. Christine Lagarde, President of the European Central Bank said Friday.

“When inflation pressure is expected to fade – as is the case today – it does not make sense to react by tightening policy,” she said. “The shock will have passed by so tightening won’t affect the economy.”

She said that tightening policies now could result in a squeeze on household incomes. They are already suffering from shocks like soaring energy prices, which will likely slow growth.

According to her, “In such a situation, tighter monetary policy would only exacerbate the contractionary effects on the economy.”

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