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Lagarde Sees Strong Policy Transmission Via Banking Channels

ECB
Q: Can you say how much of the impact from previous tightening is yet to have on inflation and the economy? How would you react to another spike in energy costs are a result of conflict in the middle east? Can you afford to wait for second-round effects?
  • A: Today’s economy has very high inflation with high level of interest rates, strong employment and is weakening. We have to take all these factors into account to see how higher energy costs would affect GDP and inflation. We have a strong determination to return inflation to target.
  • What we are seeing is a very strong transmission of our monetary policy in the banking sector in particular. The financing of the economy is directly affected as a result, which plays into the dampening of demand and inflation. We know that there is still more to come. There is a transmission lag.
  • The assessment from our staff is that there is more to come into terms of affecting the economy. It will continue to unfold through to the end of the first quarter of 2024. It is obvious that in the housing sector there is transmission to the real economy.
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com
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MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com
EM BulletHomepagemarkets-real-timeEmerging Market NewsBulletMarketsFixed Income BulletsForeign Exchange BulletsEuropean Central Bank (ECB) Market News

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