The world’s central bankers determined to control inflation

First modification: 06/30/2022 – 17:16

The answer everyone is looking for. Inflation is the main protagonist of the three days of the Forum in Sintra, Portugal, organized by the European Central Bank, the first face-to-face since the start of the pandemic.

Jerome Powell, president of the United States Federal Reserve (Fed) said he is convinced that he will “successfully return inflation to 2%” because he has the tools to do so and despite the damage it could cause to part of the population, he defended that the biggest problem would be letting inflation become persistent.

Powell believes that the US economy is in good shape to face the interest rate hikes that are taking place at the moment with a “very strong” labor market, so he expects “growth to remain positive.”

Is there a risk that we go too far? There is certainly a risk, but I would not agree that it is the biggest risk to the economy. I think the biggest mistake to make, let’s put it that way, would be not to restore price stability,” Powell said.

“What we have to do is return inflation to 2%,” said the president of the European Central Bank (ECB), Christine Lagarde, also willing to return to the main objective of the central bank she directs.

“I didn’t say gradual, period. I did say gradual, but optional. And I think it’s a combination of the two that really matters to us. Moving gradually is certainly appropriate in times of great uncertainty, but as the uncertainty clears in several aspects, we will certainly have to be less gradual and give more weight to optionality. But at the moment we have both things combined”, Lagarde commented at the Forum.

The ECB announced rate hikes in July and September, but these measures must go hand in hand in combating the “inherent” risk of fragmentation of the euro zone, derived from the fact that the 19 countries have different budgetary policies and markets.

For his part, the governor of the Bank of England, Andrew Bailey, stressed that “the key for us is to return inflation” to the target, which is why, like the ECB, energy prices and the war in Ukraine are major obstacles .

“We have to do everything we can,” Bailey added.

The central banks of the world face the challenge of curbing inflation by raising interest rates, but in a balanced way without causing an economic recession which, until now, is the key to the nervousness in the stock markets.

with EFE