Lagarde: If Necessary, Will Design New Instrument To Deliver "Flexibility"

Q: In any case of renewed fragmentation unrelated to the pandemic (e.g. due to the War, or recession) will the ECB use APP reinvestments flexibly? Are you studying new tools for fragmentation? How far is the GC worried about a wage-price spiral?

• A: We are in a normalisation process and we are continuing on that path.
• It has been the case in recent years that flexibility served us well. It is important that unwarranted fragmentation is avoided.
• If necessary, we will move promptly and we will design whatever additional instrument is appropriate to deliver flexibility. The reinvestment policy for PEPP is coined with this ‘flexibility’ possibility.
• We are looking at wages carefully and we are seeing relatively muted wage increases. We know that the longer inflation are at a high level, the more likely that wage negotiation, raising salary entry levels etc will take place. We will continue to look at this extremely carefully.