Europe’s central bank ready to ‘stamp out’ surging inflation

Jun 28, 2022, 3:08 AM | Updated: 9:45 am
European Central Bank President Christine Lagarde, left, speaks with Hungary's Prime Minister Vikto...

European Central Bank President Christine Lagarde, left, speaks with Hungary's Prime Minister Viktor Orban during a round table meeting at an EU summit in Brussels, Friday, June 24, 2022. EU leaders were set to discuss economic topics at their summit in Brussels Friday amid inflation, high energy prices and a cost of living crisis. (AP Photo/Olivier Matthys)

(AP Photo/Olivier Matthys)

SINTRA, Portugal (AP) — The head of the European Central Bank said Tuesday that it will move gradually to combat soaring consumer prices with interest rate hikes in July and September but will keep its options open to “stamp out” inflation if it surges faster than expected.

In a speech opening an ECB forum on central banking in Sintra, Portugal, bank President Christine Lagarde used strong terms as policymakers target inflation running at a record 8.1% in the 19 countries using the euro. With new inflation figures due out Friday, Lagarde said the bank is using the dual approach to be able to respond to economic uncertainty.

Russia’s war in Ukraine has led to surging energy and food prices that are higher than those seen in the 1970s and ’80s, and “given its energy dependence, the euro area is experiencing these shocks acutely,” Lagarde said.

“The size and complexity of these shocks are also creating uncertainty about how persistent this inflation is likely to be,” she said.

The bank has already announced it will end asset purchases that worked to boost the economy on Friday, and follow with its first interest rates hikes in 11 years at its meeting next month. It will also raise rates in September but is leaving the option open for a bigger hike than the quarter-point increase in July, in case inflation keeps spiking.

The ECB also is trying to avoid further hurting economic growth by acting too aggressively, having “revised markedly down our forecast for growth in the next two years,” Lagarde said.

But “there are obviously conditions in which gradualism would not be appropriate. If, for example, we were to see higher inflation threatening to de-anchor inflation expectations or signs of a more permanent loss of economic potential,” she said, “we would need to withdraw accommodation more promptly to stamp out the risk of a self-fulfilling spiral.”

Other central banks around the world, including the U.S. Federal Reserve, have moved quicker than the ECB to combat runaway inflation. But they face the threat of spurring a recession as they make borrowing more expensive, with Fed Chair Jerome Powell acknowledging last week that “it’s certainly a possibility.”

The Fed has raised rates three times this year, including an increase of three-quarters of a point that marked its biggest hike in nearly three decades, and has more planned. The Bank of England has raised rates five times since December.

Powell and Bank of England Governor Andrew Bailey will join Lagarde for a policy panel discussion at the ECB forum on Wednesday.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

FILE - Maricopa County Recorder Stephen Richer speaks inside the Recorders Office, Nov. 9, 2022, in...
Associated Press

Dominion conspiracies highlighted by Fox lawsuit have election officials concerned for safety

Maricopa County officials are bracing for what could happen when it comes time to replace its contract for voting equipment.
1 day ago
A building is damaged and trees are down after severe storm swept through Little Rock, Ark., Friday...
Associated Press

Tornado causes widespread damage to buildings, vehicles in Little Rock

A tornado raced through Little Rock and surrounding areas Friday, splintering homes, overturning vehicles and tossing trees.
1 day ago
FILE - Former President Donald Trump speaks with reporters while in flight on his plane after a cam...
Associated Press

Worries grow that Trump indictment could undermine public confidence in other investigations

Trump’s attempts to overturn those results amid false claims of widespread fraud are at the heart of two other ongoing investigations.
1 day ago
(Facebook Photo/Superior Court of Arizona in Yavapai County)...
Associated Press

Arizona judge has cases reassigned following DUI arrest

The Arizona Supreme Court has ruled that all cases currently assigned to a Yavapai County Superior Court judge recently arrested on suspicion of extreme DUI will be reassigned to other judges.
5 days ago
Haitian migrant Gerson Solay, 28, carries his daughter, Bianca, as he and his family cross into Can...
Associated Press

US, Canada to end loophole that allows asylum-seekers to move between countries

President Joe Biden and Canadian Prime Minister Justin Trudeau on Friday announced a plan to close a loophole to an immigration agreement.
8 days ago
Expert skateboarder Di'Orr Greenwood, an artist born and raised in the Navajo Nation in Arizona and...
Associated Press

Indigenous skateboard art featured on new stamps unveiled at Phoenix skate park

The Postal Service unveiled the “Art of the Skateboard" stamps at a Phoenix skate park, featuring designs from Indigenous artists.
8 days ago

Sponsored Articles

(Desert Institute for Spine Care in Arizona Photo)...
Desert Institute for Spine Care in Arizona

5 common causes for chronic neck pain

Neck pain can debilitate one’s daily routine, yet 80% of people experience it in their lives and 20%-50% deal with it annually.
...
Day & Night Air Conditioning, Heating and Plumbing

Company looking for oldest air conditioner and wants to reward homeowner with new one

Does your air conditioner make weird noises or a burning smell when it starts? If so, you may be due for an AC unit replacement.
...
Quantum Fiber

How high-speed fiber internet edges out cable for everyday use

In a world where technology drives so much of our daily lives, a lack of high-speed internet can be a major issue.
Europe’s central bank ready to ‘stamp out’ surging inflation