Frankfurt, November 20, : .Christine Lagarde (ECB President) said that the European Central Bank should not be rushing to tighten its monetary policies because the high inflation rates seem temporary. Lagarde spoke via videolink on Friday and stressed the need to maintain consistency in ECB’s monetary policies to help inflation reach the target of two percent over the medium-term, even if interest rates are low.
She said, “In particular we should not rush to tighten (of monetary policies) when confronted with supply-driven or passing inflation shocks.”
Lagarde stated that the central bank was taking serious the rising inflation rate in an apparent attempt to calm concerns over a slow response to increasing prices.
Inflation rates have risen significantly in the eurozone over the past three months, with the highest levels recorded during October.After a September high of 3.4%, October’s annual inflation rate soared to 4.1%.
Inflation has caused concern that stubbornly high rates may impede recovery from a pandemic-induced depression.The central banks in several countries have taken steps to reduce their asset purchases and increase interest rates to control inflation.
In its assessment of inflation prospects within the eurozone, the ECB was consistent.
Lagarde said, “This inflation was unwelcomed and painful — there are naturally worries about how it will last.”
She stated again that inflation drivers will likely “fade in the medium-term.”
She disagreed with the notion of tightening, warning that it would make “squeezes on household incomes worsen” and not address the root cause of inflation.
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