Christine Lagarde, President of the European Central Bank (ECB), warned this Friday: “to go forward” against high Inflation by tightening monetary policy “The fight is not yet won”. In his speech at the annual meeting of central bankers jackson hole (Wyoming, USA), the senior French official declined to mention whether he had his own agency. will continue to rise children from the September meeting or leave unchanged With 4.25% (a 15-year high) at the end of July, it left two possibilities open. But at that time soured expectations Those who believe that the goal can already be reached end of the increase cycle The price of money in the eurozone.
“In this period of uncertaintyIt is even more important that central banks provide a nominal anchor to the economy. to guarantee stability Prices are set according to their own instructions. In the current environment, this means keeping interest rates at certain levels for the ECB. restrictive enough. during no matter how long it takes To ensure the timely return of inflation aim medium term of 2%“He caught it.
He added that the 2 percent target is as follows: won’t moveDespite voices arguing that raising this figure would be appropriate in the post-pandemic economic world (which is also smooth margin monetary policy before). “In front of someone changing worldMonetary policy itself is a source of uncertainty. This will be crucial for keeping inflation expectations firmly fixed. temporary deviations our goal, as in a case The economy is more prone to shocks. It will also be the key to sustainability. public trust Even in a new environment, we will not lose sight of our goal. “We must and will keep inflation at 2 percent in the medium term,” he said.
open and flexible
In this sense, Lagarde argued: “openness” achieved by having a clear target, but at the same time “flexible” Given the “complexity” of the economic and geopolitical scenario, covid and its invasion Ukraine for Russia. Therefore, he justified that: The ECB no longer moves forward It is more or less clear what he plans to do with interest rates, but he has chosen to make the decisions. from meeting to meeting and based three criteria (inflation outlook, core inflation dynamics and strength of monetary policy transmission).
The third element that Lagarde claims central bankers should have in the new environment is: “humility” keep his “credibility” in the eyes of the public. “While we must continue to strive to develop our medium-term vision, we must also be open about: the limits of what we know now and what our policy can“, argued before conceding that investigations suggest that households are less trusting Recently, as at the beginning of the inflation shock, central banks have been wrong in their forecasts. temporary.
After reaching a maximum of 10.6% in October, Headline CPI for the euro zone moderated and fell to 5.3% in July from 5.5% in June. However, the key indicator remained at 5.5% for the second month in a row, remaining above May (5.3%) and just below the maximum reached in March (5.7%). Next to you economy gives symptoms contraction: After stagnating in the first quarter of 2022 and falling 0.1% in the last quarter, it grew by 0.3% in the second quarter; The latest data shows that it could contract by 0.2% in the third quarter. HE unemploymentYes, it’s still at historical lows, but at 6.4%.
insufficient cooling
in the same forum Federal Reserve (FED), Jerome Powell, warned that the dollar central bank is “watching for signs that the (US) economy may recover”. not be cold as expected.” So, rate increases they wouldn’t be effective enough curb demand Until inflation falls to the 2 percent target in the medium term. But it is also the world’s best central bank. Will be “careful” As he did in July, he once again left open the issue of whether he would continue to raise interest rates or not. handle currently at 5.25%-5.5%.
“We’re navigating as usual guided by the stars under a cloudy sky. In such situations, risk management considerations are critical. At future meetings, we will evaluate our progress based on: integrity of data and evolving prospects and risks. Based on this evaluation; we will proceed carefully In deciding whether to tighten monetary policy further or keep rates flat and wait for more data,” Powell continued, leaving all options open.
increased hardening
Powell warned in this sense: fall in inflation Core in June and July (4.7% increase) not enough To find out if the decline will continue or stop in the coming months. He also emphasized that: GDP growth (0.5% in the first quarter and 0.6% in the second quarter) “above expectations and long-term trend” consumer spending this result “especially solid”and that Real estate started to give signs of improvement After falling rapidly for 18 months. “Additional proof of something constantly growing above The trend may be at risk due to the progress in inflation and justify further tightening “Violation of monetary policy,” he warned.
On the other side of the scale, the Fed Chairman highlighted the rise in interest rates. takes a few quarters dispensing all its effects, with which part of the same not detected yet In activity and inflation. But he also insisted that bringing the CPI to its 2% target “will require a substantial increase” growth period economic hold downalso true weakening of the conditions labor market“(Unemployment is at a historical low, at 3.5%.) Likewise, like Lagarde, he confirmed that he will keep the target at 2%.