The European Central Bank (ECB) would not be rushed into withdrawing monetary stimulus as officials act to contain inflation running at almost four times their 2 percent target, ECB President Christine Lagarde said.
“I don’t think that we’re in a situation of surging demand at the moment,” she told Francine Lacqua on Bloomberg Television from the World Economic Forum in Davos, Switzerland, yesterday.
“It’s definitely an inflation that is fueled by the supply side of the economy. In that situation, we have to move in the right direction, obviously, but we don’t have to rush and we don’t have to panic,” she said.
Photo: AP
Lagarde spoke a day after laying out her vision for the central bank’s next steps in a blog post.
The ECB is likely to exit negative monetary policy by the end of the third quarter, with a first interest-rate increase set for July, she said.
That prospective timetable signaling two quarter-point interest-rate hikes in the third quarter has irked some colleagues, because it would effectively exclude moving with a half-point increment, according to people familiar with the matter.
Some officials, including Bank of France Governor Francois Villeroy de Galhau, have also suggested that the ECB might end the year with positive interest rates. Traders are wagering on four 25-basis-point hikes by the ECB by the end of this year.
“When you’re out of negative, you can be at zero, you can be slightly above zero,” Lagarde said. “This is something we will determine on the basis of our projections, on the basis of our forward guidance.”
Lagarde refused to be drawn on whether the central bank might consider a 50 basis-point move.
Policymakers are walking a fine line as Russia’s invasion of Ukraine sent prices surging while denting confidence among businesses and households. New COVID-19 restrictions in China are putting additional strains on supply chains.
However, the ECB president downplayed the risk of an economic contraction, saying “for the moment, we are not seeing a recession in the euro area.”
She cited unemployment “at rock-bottom rates,” large household savings and the prospect for a strong summer for the tourism industry as forces that would offset negative shocks from the war and record inflation.
CHIP WAR: Tariffs on Taiwanese chips would prompt companies to move their factories, but not necessarily to the US, unleashing a ‘global cross-sector tariff war’ US President Donald Trump would “shoot himself in the foot” if he follows through on his recent pledge to impose higher tariffs on Taiwanese and other foreign semiconductors entering the US, analysts said. Trump’s plans to raise tariffs on chips manufactured in Taiwan to as high as 100 percent would backfire, macroeconomist Henry Wu (吳嘉隆) said. He would “shoot himself in the foot,” Wu said on Saturday, as such economic measures would lead Taiwanese chip suppliers to pass on additional costs to their US clients and consumers, and ultimately cause another wave of inflation. Trump has claimed that Taiwan took up to
A start-up in Mexico is trying to help get a handle on one coastal city’s plastic waste problem by converting it into gasoline, diesel and other fuels. With less than 10 percent of the world’s plastics being recycled, Petgas’ idea is that rather than letting discarded plastic become waste, it can become productive again as fuel. Petgas developed a machine in the port city of Boca del Rio that uses pyrolysis, a thermodynamic process that heats plastics in the absence of oxygen, breaking it down to produce gasoline, diesel, kerosene, paraffin and coke. Petgas chief technology officer Carlos Parraguirre Diaz said that in
Japan intends to closely monitor the impact on its currency of US President Donald Trump’s new tariffs and is worried about the international fallout from the trade imposts, Japanese Minister of Finance Katsunobu Kato said. “We need to carefully see how the exchange rate and other factors will be affected and what form US monetary policy will take in the future,” Kato said yesterday in an interview with Fuji Television. Japan is very concerned about how the tariffs might impact the global economy, he added. Kato spoke as nations and firms brace for potential repercussions after Trump unleashed the first salvo of
SUPPORT: The government said it would help firms deal with supply disruptions, after Trump signed orders imposing tariffs of 25 percent on imports from Canada and Mexico The government pledged to help companies with operations in Mexico, such as iPhone assembler Hon Hai Precision Industry Co (鴻海精密), also known as Foxconn Technology Group (富士康科技集團), shift production lines and investment if needed to deal with higher US tariffs. The Ministry of Economic Affairs yesterday announced measures to help local firms cope with the US tariff increases on Canada, Mexico, China and other potential areas. The ministry said that it would establish an investment and trade service center in the US to help Taiwanese firms assess the investment environment in different US states, plan supply chain relocation strategies and
RSS