Lagarde warns of continued “uncertainty” in the eurozone
Friday – 23 Ramadan 1444 AH – April 14, 2023 AD
Christine Lagarde during the spring meetings of the International Monetary Fund and the World Bank in Washington (AFP)
Berlin: «Middle East»
European Central Bank President Christine Lagarde announced today (Friday) that inflation in the euro area will continue to decline in the coming months, thanks to lower energy prices and higher interest rates, but warned that these expectations are shrouded in “a great deal of uncertainty.”
Lagarde said, in a speech during the spring meetings of the International Monetary Fund and the World Bank, the content of which was published on the European Central Bank website: “We expect that inflation in the euro area will continue to decline (…) However, these expectations are still surrounded by a great deal of uncertainty.” According to the French Press Agency.
After rising strongly last year due to an increase in energy prices and the post-coronavirus recovery, inflation in the Eurozone eased from the fall, thanks to calm in energy markets and an easing of supply tensions.
Lagarde said that this trend “will continue given the pressures on prices, which are declining, and the tightening of monetary policy, which is working to curb demand more and more.” And she added that the “historic wage growth” associated with the decline in the unemployment rate, and “inflation compensation” will continue to “support inflation.”
And she explained that the European Central Bank remains cautious regarding its expectations, given that there are “a lot of risks, whether it is up or down.” And she pointed out that “greater pressures on supply chains, or larger-than-expected increases in wages or profits, may lead to higher inflation.”
The European official stated that while energy prices are falling, food prices continue to rise. Conversely, “tensions in financial markets and lower energy prices may lead to a faster decline in inflation,” according to Lagarde.
And she pointed out that “the same caution applies to economic activity,” noting that “the prospects for recovery are still fragile amid the continuing state of uncertainty.”
Despite declining for 5 consecutive months, inflation remains at a very high level of 6.9% in March in the Eurozone. The ECB does not expect to return to its medium term target of 2% until 2025.
To counter inflation, the financial institution has raised key interest rates by 3.5 percentage points since July, and does not intend to stop there.
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