ECB is likely to avoid long-term commitment in December: Lagarde


Frankfurt — The European Central Bank may set a relatively short-term policy at this month’s meeting due to increasing uncertainty, but the decision should be delayed as the market needs direction. Not so, ECB Governor Christine Lagarde told Reuters on Friday.

Conservative policymakers avoid long-term commitments at the December 16 rally, given recent high inflation measurements and the resurgence of the coronavirus pandemic, including the emergence of Omicron variants. I am asking the ECB.

Some have even discussed the possibility of pushing a decision in early 2022, hoping that delays would make growth and inflation clearer, an option Lagarde categorically rejected on Friday.

In an interview at the Reuters Next Conference, Lagarde said, “There is a way to clarify without making a long-term commitment, and (a) there is too much uncertainty to make a very long-term commitment. There is an error. “

“But likewise, we need to show very clearly that we are ready (to act) in both directions.” When the conditions for a rate hike were met, the ECB “hesitated to act.” I wouldn’t, “she said.

Lagarde downplayed concerns about Omicron variants, claiming that Europe was well adapted to living under a pandemic.

“We need to be vigilant, but I think we should have some confidence from the fact that we learned to live with previous variants,” she said. “Another wave we are experiencing in the euro area … was what we included in the unfavorable scenario (of our predictions).”

The December meeting will be the most important this year. Eurozone central banks have already stated that they will end the € 1.85 trillion pandemic emergency stimulus in March and “realign” other tools to fill the void.

Lagarde will not discuss meeting options, but said the ECB’s main tool, the pandemic emergency purchase program, has ended over the past two years and maintains the view that interest rates will not rise next year.

Dutch policymaker Klaas Knot, one of the most conservative members of the board, supported Lagarde’s call for constant interest rates on Friday, but in light of inflationary risks, move to 2023. I left the door open.

However, Lagarde is benign about rising consumer prices, despite rising upside risks and U.S. policymakers giving up the view that high inflation is temporary. Maintained the view of. Inflation may have already peaked, she said.

Lagarde added that the European labor market is still loose enough as the unemployment rate remains high, unlike the United States.

Inflation rates in 19 currencies surged to a record 4.9% last month, more than double the ECB’s 2% target. Indicators suggest that it will fall below that mark only in late 2022 at the earliest.

“You can see an inflation profile that looks like a hump,” Lagarde said. “And the hump will eventually decline.

“We have a firm view and are confident that inflation will fall in 2022.”

By Balazs Koranyi and Francesco Canepa