Digital Zeitgeist – ECB’s Drive Against Inflation Won’t Be Hampered By Market Volatility According To Christine Lagarde
FRANKFURT (Reuters) – Christine Lagarde, the president of the European Central Bank, said on Monday that the institution’s battle against inflation would not be hampered by the volatility of financial markets since the ECB has independent tools to combat both of these challenges.
On Thursday 16th March 2023, the European Central Bank (ECB) announced that it would be increasing interest rates by 50 basis points and that it would prioritise inflation and financial stability concerns when making future rate decisions.
At an appearance before the Committee on Economic and Monetary Affairs of the European Parliament, Christine Lagarde categorically refuted the assertion that the two may potentially come into direct conflict, which would force the European Central Bank to make a decision between them.
“There is no tradeoff between price stability on the one hand and financial stability on the other hand,” Lagarde said. “For each of these two stabilities we are using different tools.”
The global banking sector appeared to have one less thing to worry about after UBS Group’s state-backed takeover of Credit Suisse appeared to close off one source of concern, which caused financial stocks to fall last week. However, stocks rose on Monday after the takeover of Credit Suisse by UBS Group.
Earlier, the ECB said that the inflation forecast on its own would be sufficient to sustain more rate rises. Nevertheless, the central bank did not make any commitments about any future changes since it was concerned that market upheaval may fundamentally alter the picture.
The European Central Bank (ECB) will continue to rely primarily on interest rates as its key tool for combating inflation. On the other hand, in order to address issues pertaining to the banking industry, the ECB may either make use of its already established liquidity instruments or come up with brand new ones.
Lagarde emphasised that the lenders of the EU bloc are robust regardless of the circumstances.
“We are very confident that the capital and liquidity positions of the euro area banks are very satisfactory, with significant capital ratio and liquidity coverage ratio way in excess of requirements,” Lagarde said.
She also said that in accordance with the bank’s pledge from the previous week, the ECB was prepared to assist the financial system in the euro area with all of its available resources.
“If the tools that we have in the toolbox were not enough, I know that staff are capable of providing the adjustment or the recalibration that would be needed in order to address any liquidity risk that we would see developing.”
online sources: reuters.com, europarl.europa.eu