On Monday 7 February, the President of the European Central Bank, Christine Lagarde, explained and gave reasons to the European Parliament’s Committee on Economic and Monetary Affairs (see EUROPE 12883/17) on the recent monetary policy decisions taken by the Frankfurt-based institute, namely a monetary status quo for as long as the ‘PEPP’ operation is in place while inflation remained surprisingly strong in January.
In answer to Markus Ferber (EPP, Germany) and Michiel Hoogeveen (ECR, Netherlands) – who wondered when the ECB would finally react to the surge in inflation – Ms Lagarde replied that the Governing Council had taken note of the new situation and was of the opinion that upside risks were now dominant, especially in the short term, as a result of very high energy prices and supply outstripping demand.
Nevertheless, “chances have increased that inflation will stabilise at our target (of 2%, editor’s note) over the medium term”, even if this target is not expected to be reached in 2022, she continued; she was also of the opinion that this anchoring prefigures “a gradual normalisation” of monetary policy. According to Ms Lagarde, there is in fact no indication that inflation will remain significantly above the target over the medium term, a situation that would require “substantial monetary tightening”.
Whatever happens, the ECB President predicted the following sequence: firstly, ending the massive ‘PEPP’ operation of buying back mainly government securities in March, and then weighing up what monetary action might be required, depending on the data that will be made available at the next Governing Council meeting on Thursday 10 March. (Original version in French by Mathieu Bion)