Some of our Governing Council members are involved in this project. All in all, we must improve our projections and do better in the future. We could not have modelled the invasion of Ukraine by Russia or the supply bottlenecks caused by the COVID pandemic. We are looking at our forecasting models to see how we can better factor in elements that were not in those models and that could possibly be difficult to include in them. What matters now is that we consistently stay the course. I’m not sure if starting rate hikes three months earlier would have made a major difference. However, inflation spread into a much broader range of products and services. Most economists and forecasters initially anticipated that high inflation would be transitory and temporary, and that it would fade away. So how could those errors have affected the monetary policy decisions? In September, you said in the press conference that the ECB had underestimated earlier inflation and made forecasting errors. Some academics have said the issue is that the ECB should have started raising interest rates earlier than July 2022. Our decisions will be determined by the incoming data and driven by our goal of returning inflation to 2%. So it is not impossible or out of the question that there would be another 50 basis point hike after March? But one thing is sure: we want to bring inflation back to 2% in a timely manner. It’s on that basis that we will take our decision. I want to see the new data and I want to hear the views of my colleagues when they see the same data. I’m not navel gazing or reading a crystal ball. So now, from your perspective, should the Governing Council also stand ready for a 50 basis point tightening in May? I mean after March, if it is warranted by the incoming data. The Governing Council intends to raise interest rates by another 50 basis points at the next monetary policy meeting in March and will then evaluate the subsequent path of monetary policy. You have repeatedly said the ECB must stay on course when it comes to tightening monetary policy. Core inflation – inflation without energy and food prices – is currently still at its highest level ever: in January, it was 5.3% for the euro area as a whole. Prices for crude oil and natural gas have already fallen to pre-pandemic levels. Headline inflation is still unacceptably high, but it is likely to decline because energy costs are falling. Are you confident that headline inflation is now on a declining path? These actions are an expression of solidarity to counter the consequences of this terrible war. Governments, such as Austria and Germany, Estonia and Finland, have been cooperating on securing energy supplies. We will no longer buy Russian oil, and gas imports from Russia have gone down radically. The energy saving measures and the solidarity between euro area countries have also played their part.Įuropean countries have responded to President Putin’s unlawful and unjustified war by working better together. The euro area has benefited from a warm winter, which on the other hand is not a good thing as such because it is a manifestation of climate change. What do you think are the main reasons for the better-than-anticipated economic developments in the euro area? Wage negotiations and fiscal support will also play an important role. Another big question is how the lifting of COVID restrictions in China will affect its economic recovery and the global economy. The most recent projections from both the IMF and the European Commission suggest that there will not be a recession in the EU or the euro area this year.īut there is a lot of uncertainty, and one central question is where the war is heading. So how confident are you that recession is now avoidable in the euro area? Before that, a recession was expected at the turn of the year. President Christine Lagarde, the European Commission said last week that the euro area is set to narrowly avoid a technical recession. Interview with Christine Lagarde, President of the ECB, conducted by Petri Sajari
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