November 16, 2021

ECB President Finally Opens His Mouth On ECB Policy, This Is What Traders Need To Know!

 European Central Bank President Christine Lagarde on Monday appeared to comment on the tightening of monetary policy. He is personally of the view that the tightening of monetary policy at this point to curb inflation could hamper the recovery of the European zone. This does not imply a rejection of stricter policies.

With inflation already doubling its 2% target and likely to rise again by the end of the year, the ECB faces pressure to set aside simple monetary policy and address price growth that is eroding household purchasing power.

Speaking to EU lawmakers, Lagarde acknowledged the inflation surge will be higher and longer than expected but it will start to fade next year. Therefore, any measure at this point could have a negative impact on the economy.

Household consumers have expressed concern as they continue to be squeezed by price surges, especially in energy and fuel. So with that Lagarde noted that undue tightening of funding conditions is undesirable, and could hamper economic recovery.

“If we take any tightening measures now, it could cause more harm than any good,” he said.

On the other hand Deutsche Bank CEO Christian Sewing expressed disapproval of the narrative that inflation is temporary and urged global central banks to act. Where his statement contradicts Lagarde's statement.