“But the public can be sure of one thing: we will ensure price stability, the return of inflation back to two percent in the medium term is out of the question,” she said. The head of the ECB spoke in this way despite the recent turbulence in the banking sector.
The ECB raised its key interest rate again last week by half a percentage point. It was at a time when news was already coming in about the failure of medium-sized American banks. But the ECB did not indicate what its next step in monetary policy would be, only mentioning that it would look back at economic data when determining it.
The takeover of the second largest Swiss bank Credit Suisse by its larger competitor UBS and the situation of some American banks caused concern about the condition of banks in the eurozone. According to Lagarde, however, the banking sector in countries paying in the euro is resilient, thanks to adequate capital equipment.
Shares of European banks weaken sharply, the takeover of Credit Suisse did not calm the markets
Economic
Given the current tension in the markets, the ECB is ready to support the financial system with additional liquidity and maintain a smooth transmission of monetary policy. “One thing is certain: there is no compromise between price and financial stability,” Lagarde said.
European monetary policy makers aim for price stability in the eurozone with an inflation rate of around two percent in the medium term. However, this goal has been moving away from them for many months.
In February, the inflation rate in the eurozone was 8.5 percent and in January 8.6 percent. Inflation was initially supported mainly by higher energy and food prices, but gradually the increase in prices affects more and more areas of life.
The euro was up about 0.3 percent against the dollar at $1.0797 around 1:00 p.m. CET on Wednesday. It is now at a five-week high.
The ECB raised key rates by half a percentage point despite the turbulent markets
Economic