ECB’s Lagarde: Must Act in a Gradual Way So That We Don’t Induce Recession

25 April 2022

By David Barwick – FRANKFURT (Econostream) – European Central Bank President Christine Lagarde on Sunday indicated that once the ECB’s net asset purchases were over, the ECB would decide on the details of interest rate increases, acting gradually so as to preserve economic growth.

Interviewed on US television network CBS's show Face the Nation, Lagarde reiterated that the US Federal Reserve and the ECB were in different situations, citing Eurozone core inflation of 2.9%, but said they had ‘the same resolve’ with respect to fighting inflation.

‘So, we have embarked on that journey of gradually removing accommodative monetary policy, so we will be interrupting the purchases of assets in the course of the third quarter – high probability that we do so early in the third quarter – and then we will look at interest rates and how and by how much we hike them’, she said. ‘But we have to be data-dependent, because of the sources of inflation that we have at the moment.’

The need to counter inflation and the importance of avoiding economic contraction were ‘the trade-off that central bank governors face at the moment’, she said. This is why the ECB has to act ‘in a sufficiently well-sequenced, well-calibrated, for us in Europe gradual way, so that we don’t induce recession’, she said.