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Lagarde calls for centralizing fiscal policies to avoid further rate hikes

Date: June 5, 2023 Time: 15:38:19

The president of the European Central Bank (ECB) gives another twist to the most aggressive message in the fight against inflation that the entity has been deploying since its last monetary policy meeting. Christine Lagarde has made a direct appeal to the governments of the Eurozone to focus the measures with which to face the pressure of prices and not force the entity to plunge into an upward escalation of interest rates even greater -and that the rate of increases launched since July is unprecedented since the creation of the euro.

“The fiscal support disbursed in 2022 must be better targeted and must not push those who make monetary policy decisions to do more” or to raise rates more and more, the French company has settled during its intervention in the debate ‘World Economic Outlook: Is it the end of an era? held this Friday within the framework of the World Economic Forum that takes place this week in the Swiss city of Davos.

“We are now heading towards a year in which we are confident that companies, households and governments will have a resilient approach, but this is a path that also applies to monetary policies,” the ECB chief added. Lagarde has valued the fact that the current situation is not “as bad as fear”, which implies an improvement in relation to the prospects that central banks and international organizations have only a few months ago, although she has highlighted the high degree of uncertainty that continues to surround them.

The president of the entity has already made clear the intention of her Governing Council to continue raising rates to control inflation that has barely moderated to 9.2% in December in the region, where the pressure of energy prices has moderated only in part, but the food goes to more. He did it the previous day in this same scenario, coinciding with the publication of the latest ECB minutes, which showed how a majority of governors promoted a rise of 75 basis points but the chief economist of the central bank, Philip Lane, managed to reduce it to half. point to be accompanied by the reduction of stimuli -finally this more moderate thesis was imposed and the issuer raised the price of money to 2.5%, its highest level since the end of 2008-.

The scenario of the global economy is “less bad”

In the same direction as what was expressed by Lagarde, the managing director of the International Monetary Fund (IMF) has also stated. Kristalina Georgieva highlighted how the global economic scenario “today is less bad than it was a few weeks ago, but it is still not good”. The person in charge of the organization has put on the table that, at the same time that the inflation outlook seems to have begun to moderate, growth in China is also doing so, which in 2022 and for the first time in decades advanced less than the economy as a whole. world

This will not be the case in 2023, a year in which activity is expected to pick up in the Asian giant. In fact, the IMF contemplates a global growth of 2.7% compared to an advance of the Chinese GDP of 4.4%. Georgieva has specified that what is still unknown is whether the recovery of the second largest economy on the planet will have an impact on oil and gas, raising prices and, therefore, pushing up inflation.

Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.

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