Link Securities | European Central Bank (ECB) President Christine Lagarde said on Friday that “staying the course” is her mantra on monetary policy and urged central banks around the world to do the same to achieve output recovery. Lagarde described 2022 as “a strange, strange year” as the low growth figures seen in the world’s largest economies were “not usual”. However, she expressed hope that “cooperatives, consumers, and state policymakers will continue to have that resilient and determined approach” that will lead to recovery. Speaking on China’s easing of its restrictions imposed to combat Covid-19, Lagarde said her government’s determination to improve its economic performance in 2023 should be welcomed. However, she warned that it will bring “inflationary pressure for the rest” as China will buy much more energy than in 2022, pushing up energy prices.
The day before, Lagarde had reiterated that the ECB will continue to raise interest rates and leave them in restrictive territory for as long as necessary to bring inflation down to its 2% target in a timely manner.
Assessment: Lagarde’s statement on Friday that the recovery of China’s economic growth may have a negative impact on global inflation is something that has been pointed out for some time now as it justifies the conservative stance that central banks are adopting. The biggest risk regarding inflation is that monetary policies “fall short”, as the possible resurgence of inflation is a real threat.