We Have a Narrow Path To Avoid Hard Landing, ECB’s Lagarde Says

16 April 2023

By Xavier D’Arcy – FRANKFURT (Econostream) – Monetary policymakers have a narrow path to navigate in order to engineer a soft landing, European Central Bank President Christine Lagarde said on Sunday.

In an interview with American television network CBS, Lagarde said that recent bank failures had facilitated her planning, but complicated the picture regarding growth.

In order to avoid a ‘hard landing’ for the economy, Lagarde said the ECB had ‘a narrow path to navigate, which requires that both the governments and the central banks around the world adopt the right policies.’

Regarding the impact of recent financial instability originating in the banking sector, ‘in a way it facilitates my planning and it complicates the future as far as growth', she said.

The full effect of the banking turmoil was still uncertain, she said, but she ruled out that it could lead to the ECB cutting rates, saying that ‘we don't have to reduce [interest rates].’

She expressed cautious optimism regarding the global economic outlook, noting that ‘there is recovery. That's, I think, a point that was not really firm only six months ago, where we all assumed that there would be a recession, if only a technical one. If you look at all the forecasts at the moment, it's all positive. It's been slightly downgraded. But overall, we have a recovery’.

Since last year’s energy crisis, Europe had ‘moved from the illusion of plenty of energy, free money, to a time of resilience and building buffers’, she said.