(Finance) – To the ECB “we will not allow this phase of high inflation to be transmitted to economic behavior creating a persistent inflation problem. Our monetary policy will pursue a clear objective: to fulfill our price stability mandate. ” president of the Eurotower, Christine Lagardeduring a speech in Frankfurt.
Lagarde then said that the european central bank will decide on the next rate hikes “meeting by meeting” and the “terminal” rate, ie the one where the ECB intends to stop, as well as the size of the hikes, “will depend on how inflation prospects evolve. We will not allow a lasting inflation problem to arise”.
“When inflation remains high for a long time, monetary policy plays an important role in ensuring that inflation expectations remain anchored while shocks affect the economy” – said the head of the Frankfurt bank – adding that “If expectations break loose and trigger a price-wage spiral, they can lead to persistent inflation even after the economic shocks have disappeared.”
Lagarde then launched a call on governments to focus budgetary policies “on public investment and debt sustainability“rather than on” transfers and public consumption “, a choice that” could increase inflationary pressures “.
“The way in which fiscal policies will support businesses and households in the coming difficult winter will be important for the dynamics of inflation – he stressed -. Targeted, temporary and timely measures are necessary to protect the incomes of the most vulnerable individualswhile preventing a significant loss of production capacity following production cuts and bankruptcies. ”