ECB’s Lagarde Says ‘Stay the Course’ Is Her Monetary Policy Mantra
20 January 2023
By Xavier D’Arcy – FRANKFURT (Econostream) – European Central Bank President Christine Lagarde on Friday said that the ECB would continue to hike rates and that monetary policymakers would do what is necessary to return inflation to its 2% target.
‘“Stay the course” is my mantra for monetary policy purposes’, she said during a panel at the World Economic Forum in Davos, Switzerland, reiterating a comment she made the day before, and underlining policymakers’ determination to get high inflation in the euro area under control.
She warned against over-ambitious fiscal support during times of high inflation. ‘The fiscal support that was expanded in 2022 must be better directed, better targeted’, she said.
Asked about potential risks to the economic outlook, she said the main thing she wanted to avoid in 2023 was that fiscal policy ‘will work in a counter-cyclical way vis-à-vis monetary policy.’
Fiscal policy ‘must be made such that it is not going to push monetary policy actors to do a bit more’, she said. The ECB ‘will do what is necessary [but] we don’t have to be pushed to do more than necessary’, she warned.
China’s reopening following the abandonment of its zero-Covid approach ‘will have inflationary pressure’ on the rest of the world, she said. She flagged added demand for commodities and energy from China as potential inflationary factors for the euro area.