Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

ECB’s Lagarde tells governments to back off and keeps tightening

ECB’s Lagarde tells governments to back off and keeps tightening

The central bank chief warned governments against spending too heavily to shield their people from high energy prices.

European Central Bank chief Christine Lagarde rebuffed EU leaders’ criticism of her monetary policy approach on Thursday, delivering another big interest rate hike in a bid to fight red-hot inflation in the eurozone.

“We have to do what we have to do,” Lagarde said during her press conference after the ECB raised rates by a whopping 75 basis points to 1.5 percent, bringing it to the highest level since 2009. “A central bank has to focus on its mandate. Our mandate is price stability.”

In its fastest tightening cycle on record, the ECB has now raised rates by a total of 2 percent over its last three meetings — and more is to come, according to a statement following the policy meeting in Frankfurt.

The bank’s Governing Council “expects to raise interest rates further, to ensure the timely return of inflation to its 2 percent medium-term inflation target,” it said.

The comments from Lagarde, a former French finance minister, followed a series of critical remarks from EU leaders.

In the week up to the meeting, French President Emmanuel Macron, Italian Prime Minister Giorgia Meloni and Portuguese Finance Minister Fernando Medina all expressed worries over the speed at which the ECB is raising interest rates and the implications this may have on growth. Earlier in the month, similar criticism came from Finnish Prime Minister Sanna Marin.

“I’m concerned to see lots of experts and certain European monetary policymakers explaining to us that we need to break demand in Europe to better contain inflation,” Macron told Les Echos in an interview earlier this week. “One must be very careful.”

Lagarde, who has previously said the ECB may have to raise rates to a level where they hurt growth, said the bank was willing to raise rates beyond neutral levels, where interest rates neither boost growth in order to ensure price stability.

But she did not say at which pace and to which level interest rates will move.

Her broader comments, however, will cement market expectations of a slowdown in tightening ahead.

Not only did she drop the reference to rate hikes over the “next several meetings” from her statement, but she also noted that “the Governing Council has made substantial progress in withdrawing monetary policy accommodation.”


Warning to governments


In addition, she said that policymakers will consider the rising risk of a recession and its dampening impact on inflation as well as the fact that previous tightening moves will only work with a lag, meaning that the full impact of previous hikes has yet to play out.

This does not mean that tensions won’t flare up again between the ECB and eurozone capitals.

“ECB President Lagarde put more emphasis on recession risks at today’s press conference,” said Commerzbank economist Jörg Krämer. “But due to persistently high inflation data as well as de-anchored inflation expectations, another big rate hike in December remains on the table.”

Despite the recent measures to placate inflation in the Eurozone, tensions might flare up again between the ECB and EU capitals


Lagarde doubled down on her demands that governments ensure fiscal measures remain limited as otherwise even more aggressive ECB action will be in store. Germany and other governments are providing generous subsidies to shield their populations from major increases in energy prices.

“I must have repeated many, many times the famous triple-T, which is temporary, targeted and tailored,” she said. “Which, from our perspective, will help them address the needs of the most affected by income erosion and also by inflation, but without fueling inflation on a broad basis, because that would be utterly counterproductive in that it would require that we take harder monetary policy measures in order to deliver on our mandate.”

At the same time, governments should pursue fiscal policies that show they are committed to gradually bringing down high public debt ratios, Lagarde said. Recent market turmoil in the United Kingdom has shown what happens when fiscal policy goes on a collision course with a central bank fighting red-hot inflation.

ECB relations with fiscal authorities will no doubt remain a key focus in the coming months, not least because Lagarde signaled the Governing Council will agree on principles of reducing its massive government bond holdings at the December meeting that indebted member countries have relied on heavily.

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Miliband Sets Climate and International Law at Centre of UK Diplomacy
Czech Central Bank Governor Rejects Early Euro Entry and Rate-Cut Pressure
Trump Readies New Tariffs as Temporary Global Levy Nears Expiry
Vivienne Westwood Casts Cicciolina, 74, in Its New Autumn Campaign
Dejavu: Germany’s Military Expansion Reshapes Europe’s Strategic Balance With France
Morgan Stanley Builds a Wall Street Lead in AI Infrastructure Finance
High Prices Push Coffee Drinkers Toward Whole Beans and Home Brewing
Trump Draws Boos and Podium Scrutiny at Spain’s World Cup Triumph
Brilliant move: Péter Magyar Moves to Nominate Chess Grandmaster Judit Polgár as Hungary’s President
Spain Defeats Argentina in Extra Time to Win Second World Cup
Current AI Seeks to Build an Open Global AI Infrastructure Outside Big Tech Control
Germany’s Economic Malaise Reopens the Sunday Shopping Debate
Proposed U.S.-Saudi Nuclear Pact Could Permit Limited Uranium Enrichment Under International Safeguards
Netherlands Declares Water Shortage Emergency After Drought Pushes Rivers to Historic Lows
Why Kentucky Fried Chicken Became KFC—and Why the False Explanations Persist
Ukrainian Drones Strike Wildberries Warehouses Deep Inside Russia
Reported CIA Mission Helped Clear the UAE’s Path to Advanced US AI Chips
Artificial Intelligence Capital Fuels Markets While Governments and Regulators Face Mounting Strategic Tests
China’s Moonshot’s Kimi K3 Narrows the Gap With Anthropic Through Scale, Openness and Lower Cost
The Ledger Will Not Trust on Faith
Trump Administration Pressures Banks to Restrict Financial Access for Undocumented Immigrants
Passenger Bound for Germany Refused to Sit Beside a Woman on a Plane — Then Slapped a Flight Attendant
Ukraine’s Leadership Rift Spills Into the Streets as Protesters Target Army Chief
Ukrainian Drone Barrage Kills Eight and Strikes Russian Logistics Network
The Ten World Cup Finals That Defined Football History
Smartphones Are Getting More Expensive, Sales Are Collapsing, and Even Apple Admits: "Prices Will Rise"
The Monaco Bombing Has Become a Test of Ukraine’s Intelligence Accountability
Leadership Change and Strategic Rivalry Redraw the Political Map
The AI Race Enters Its Infrastructure Era
Britain Nationalises British Steel to Protect Scunthorpe Production and Strategic Supply
French National Assembly Overrides Senate to Pass Historic Assisted-Dying Legislation
Spanish Prime Minister's Wife Ordered to Stand Trial as Corruption Probes Encircle Governing Party
Zelensky Faces Kyiv Protests Over Ousting of Dynamic Ukrainian Defense Minister
Thomas Tuchel Faces Fierce Backlash After Tactical Retreat Costs England World Cup Final Berth
A Quiet Bastille Day: France Grapples with World Cup Heartbreak and Leftover Fireworks
Spain in Ecstasy: "We Feel Unbeatable, We Taught the Whole World a Lesson"
Spain and UK Dismantle Gibraltar Border Following Landmark Schengen Integration Treaty
Hungary's "Puppet" President to Be Ousted, Orbán Fumes: "Democracy Is Dead"
Forget Tinder: The Surprising Platform Where People Find Love
Harvard Astrophysicist to Lead U.S. Scientific Advisory on Unidentified Aerial Phenomena
Emergency Sirens Activated Across Bahrain as Interior Ministry Issues Shelter Directives
World Cup Visitors Turn American Big-Box Stores Into Souvenir Stops
Netflix Weighs Always-On Channels, Bundles and Short-Form Video
Passenger Is Pulled Partly Outside Ryanair Jet After Window Fails Mid-Flight
The AI Invoice Shock: Layoffs Didn't Save Managers Money — They Cost Them More
Concern: Sexually Transmitted Bacterium Among Men Develops Antibiotic Resistance
Passenger Partially Pulled Out of Ryanair Jet After Cabin Window Fails Mid-Flight
Severe Heatwave Drives Dangerous Ground-Level Ozone Pollution Across Two Thirds of European Union
The Physical and Electronic Barriers Disrupting Domestic Wireless Networks
France and Morocco Open World Cup Quarter-Finals as Collina Defends Refereeing
×