Energy prices impact European inflation

Christine Lagarde, president of the European Central Bank (ECB) stressed that an increase in interest rates will not impact the reduction in energy prices, which are responsible for 50 % of the increase in inflation on the continent.

The official made these statements in the framework of an environment of great pressure for the institution to raise interest rates. “If I raise interest rates today, it won’t lower the price of energy,” she said.

Inflation in the eurozone during the month of March registered 7.5 %, while in the United States it reached 8.5 %.

According to Lagarde, inflation in Europe “is very high” currently and, in her opinion, “50 % is related to energy prices” and the war between Russia and Ukraine increased “drastically those prices”,

Measures to face pandemic affected inflation

The president of the financial entity also stressed that the different countries in the area and the United States took measures to face the global pandemic caused by Covid-19, causing an increase in inflation of a different nature on both sides of the Atlantic.

Different central banks around the world are increasing interest rates as a measure to reduce consumption and try to stabilize the prices of products and services. While they stopped “asset purchases in the course of the third quarter and there is a high probability that we will do so early in that period”.

Lagarde is in the United States to participate in different financial meetings and in a statement to the media she made reference to the differences between the two economies, expressing that the “tightness of the labor market in the United States is clearly contributing to a possible strong inflation and a second-round effect in which prices go up, wages go up, there is a labor shortage, wages continue to go up, and that feeds back into prices.”

M. Rodríguez

Source: bancaynegocios.com