European Central Bank President Christine Lagarde is holding a press conference during the informal meeting of European Union economic and financial ministers on 11 September 2020 in Berlin, Germany.
Hayoung Jeon – Swimming pool | Getty Images
LONDON – European Central Bank President Christine Lagarde said the bank would not respond to inflation “inflation” on Thursday as prices rise in the eurozone.
The ECB has struggled to reach its near-target inflation target of less than 2% in recent years, exacerbated by the coronavirus pandemic. However, recent data have shown an increase in prices.
The main inflation figures published in January showed inflation of 0.9% year-on-year, the highest level in almost 12 months. In addition, core inflation, which eliminates volatile items such as energy and food prices, reached 1.4% year-on-year in January, up from 0.2% in December.
“We will not focus on the coups, on unsustainable movements and I think we need to warn together that we will see inflation figures rise over (20) 21,” Lagarde told European lawmakers on Thursday .
“We cannot confuse the forest with the tree. A short-term inflationary movement related to temporary factors of a transitory nature should not precipitate any concrete movement, on the contrary. Therefore, we are not playing to recover. , they try to prevent yields from outpacing economic developments, ”Lagarde also said.
Recent price increases in the euro area have been linked to new tax rules in Germany, as well as a new carbon tax, in addition to higher energy prices. The impact of the first two is expected to fade over time.
“While we believe 2021 will be the year of recovery, we don’t see it until the second half of (20) 21 and we believe that any performance increase that would work a bit as a brake would not be desirable.”
At a press conference last week, Lagarde said the ECB expects inflation to be volatile in the coming months, but that it is likely to be limited in time. The ECB estimates an inflation rate of 1.5% in 2021 and 1.2% in 2022.
More voucher purchases
After its last policy meeting last week, the central bank said its bond purchases will increase “significantly” in the next quarter.
Loan costs have risen in the region since February. This could mean more debt service spending for euro area governments, which could derail the economic recovery.
Speaking on Thursday, Lagarde said it may take a while for this increase in purchases to materialize.
“While records of our weekly purchases will continue to be distorted by short-term noisy factors, such as occasional occasional redemptions, the passage of our program’s execution rate will become visible when found at longer time intervals.” , he said. European legislators.
The ECB’s Pandemic Emergency Purchase Program, or PEPP, has been in place for a year and is expected to last another 12 months, totaling € 1.85 trillion ($ 2.21 trillion ).