2023-04-16 17:11:06
Published
BCEBanking crisis should not imply lower rates, says Lagarde
The recent banking crisis should not involve lowering rates by the European Central Bank to protect economic growth, its president, Christine Lagarde, commented on Sunday.
Christine Lagarde, President of the European Central Bank (ECB).
AFP
The recent banking crisis should not involve lowering rates from the European Central Bank to protect economic growth, its president, Christine Lagarde, commented on Sunday, deeming it essential to observe the extent to which banks are tightening credit conditions or not. “We don’t have to cut (rates). We will see. Because we really have to measure what will come out of these recent financial events”, indicated the President of the ECB during an interview on the channel CNN.
“What impact will they have? How will the banks react? How are they going to assess the risk” and continue to lend money to businesses and households, continued Christine Lagarde. “If they don’t lend too much and manage their risk, it might diminish our work to reduce inflation (…). But if they tighten credit too much, it will weigh excessively on growth,” she explained.
“There is a recovery in the global economy”
The President of the ECB was in Washington for the spring meetings of the IMF and the World Bank, which end this Sunday. Asked regarding the global economy, she was optimistic: “There is a recovery. This is, I think, a point that was not obvious just six months ago when we were all anticipating a recession, if only technically”. However, “the path is narrow, requiring governments and central banks around the world to adopt the right policies.”
She also warned of the risks of a fragmentation of the world economy into two blocks, one turned towards the United States, the other towards China: “Decoupling and a bipolarisation of the world would lead to less growth economy, less prosperity in the world, more poverty. (…) It is something that must absolutely be avoided”. She also expressed alarm at the global consequences of a US default if the US Congress fails to raise the debt ceiling.
“I just can’t believe they would let such a serious disaster happen. (…) I understand politics, I myself have been political. But there comes a time when the best interests of a nation must prevail,” added Ms. Lagarde, who served as France’s economy minister. The United States must regularly increase, via a vote of Congress, the government’s debt capacity, an increasingly politicized vote. Without an agreement between Republicans and Democrats, the United States might be placed in default of payment this summer, an unprecedented situation.
(AFP)
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