European Central Bank President Christine Lagarde said policymakers mustn’t let up in their battle with inflation — even as the spike in prices appears to have peaked.
(Bloomberg) — European Central Bank President Christine Lagarde said policymakers mustn’t let up in their battle with inflation — even as the spike in prices appears to have peaked.
“We have to also stay that course of resilience that we observed in 2022,” Lagarde told a panel Friday at Davos. “‘Stay the course’ is my mantra for monetary-policy purposes.”
Lagarde and some of her ECB colleagues have been pushing back against suggestions that the pace of interest-rate hikes should be slowed after an expected half-point move next month. While headline inflation has dipped back into single digits, underlying price gains reached a record in December. The economy, meanwhile, is proving robust — despite rising rates.
ECB Governing Council member Klaas Knot said Thursday that there’ll still be more than one half-point increase in borrowing costs. His French colleague, Francois Villeroy de Galhau, has said rates should peak by the summer and then stay at that level for some time.
Lagarde warned that excessive and untargeted government spending to shield households and businesses from the energy crisis could prompt further ECB action if it stokes inflation.
“I hope that in 2023 fiscal policy will not work in a counter-cyclical way to monetary policy,” she said. “We don’t need to be pushed to do more than is necessary.”
–With assistance from Simon Kennedy, William Horobin, Chad Thomas and James Regan.
(Updates with more from Lagarde in last two paragraphs.)
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