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 - Gabby Petito's mother Nichole Schmidt, wipes a tear from her face during a news conference o...

Associated Press

Mother of man who killed Gabby Petito said in letter she would help son ‘dispose of a body’

The mother of the man who killed Gabby Petito told her son in an undated letter that she would “dispose of a body” if needed because she loved him so much, according to copies of the note shared publicly for the first time this week by attorneys for Petito's parents.

3 days ago

A member of the 3rd U.S. Infantry Regiment, also known as The Old Guard, places flags in front of e...

Associated Press

5 things to know about Memorial Day including its controversies

Memorial Day is supposed to be about mourning the nation’s fallen service members, but it’s come to anchor the unofficial start of summer and a long weekend of discounts on anything from mattresses to lawn mowers.

3 days ago

FILE - This artist sketch depicts the trial of Oath Keepers leader Stewart Rhodes, left, as he test...

Associated Press

Officers describe chaos, fear on Jan. 6 as judge weighs prison time for Oath Keepers’ Rhodes

Police officers who defended the U.S. Capitol on Jan. 6, 2021, and public servants who fled the mob's attack told a judge on Wednesday that they are still haunted by what they endured, as the judge prepares to hand down sentences in a landmark Capitol riot case.

4 days ago

Pride month merchandise is displayed at the front of a Target store in Hackensack, N.J., Wednesday,...

Associated Press

Target on the defensive after removing LGBTQ+-themed products

Target once distinguished itself as being boldly supportive of the LGBTQ+ community.

5 days ago

(Photo By Tom Williams/CQ Roll Call via Getty Images)...

Associated Press

Former Arizona television journalist announces bid for Schweikert’s US House seat

A former Phoenix television journalist announced her candidacy Wednesday for the congressional seat currently held by seven-term Republican Rep. David Schweikert.

5 days ago

Tortoise by Henry Davis earned an honorable mention in the "Adventures in Nature” student photo c...

Associated Press

When you adopt a desert tortoise, prepare for a surprisingly social and zippy pet

They’re not fluffy, they don’t play fetch and they certainly don’t roll over. But there is such a thing as a lap tortoise.

6 days ago

Sponsored Articles

...

Desert Institute for Spine Care

Spinal fusion surgery has come a long way, despite misconceptions

As Dr. Justin Field of the Desert Institute for Spine Care explained, “we've come a long way over the last couple of decades.”

(Photo by Michael Matthey/picture alliance via Getty Images)...

Cox Communications

Valley Boys & Girls Club uses esports to help kids make healthy choices

KTAR’s Community Spotlight focuses on the Boys & Girls Club of the Valley and the work to incorporate esports into children's lives.

...

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.

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