Home » Lagarde: “With war in Ukraine significant increase in risks to growth”. The estimate on inflation rises, the one on GDP falls

Lagarde: “With war in Ukraine significant increase in risks to growth”. The estimate on inflation rises, the one on GDP falls

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Lagarde: “With war in Ukraine significant increase in risks to growth”.  The estimate on inflation rises, the one on GDP falls

MILANO – The conflict in Ukraine falls on the table of the Governing Council of the European Central Bank: “The Russian invasion of Ukraine is a watershed for Europe. The Governing Council expresses its full support for the Ukrainian people. It will ensure regular liquidity conditions and implement the sanctions decided by the European Union and European governments”, yes reads in the communiqué at the end of the Eurotower summit. The president Christine Lagardein conference with a support pin in Kiev bluntly says that the war “will have material impacts on inflation, economic activity, trust and trade”. Nonetheless, using due caution and conditionality according to the evolution of the situation, the ECB signals that it intends to finish the purchases of securities for September, sooner than the market expected.

ECB, a point for the hawks. Lagarde approaches the squeeze, even if war and inflation are scary

by our correspondent Tonia Mastrobuoni


Impact of war: inflation goes up, growth goes down

“The Governing Council – ensures the press release – will take all necessary measures to fulfill the ECB’s mandate to pursue price stability and safeguard financial stability”. Lagarde takes into account that “the European recovery will be weakened by the war” and that the economic and growth prospects of the Eurozone “depend on the prospects” of the conflict between Russia and Ukraine and “on the impact of sanctions and other measures”. With the invasion, it is evident, “the risks for the economic prospects have increased substantially and are pointing downwards”, as on the other hand the alarms launched in Italy on the problem of the scarcity of materials necessary for production testify.

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Meanwhile the Eurotower economists have already had to make the first adjustments to the estimates. The GDP of the Eurozone is expected to grow at a rate of 3.7% in 2022, 2.8% in 2023 and 1.6% in 2024, while in December the ECB staff had forecast an annual expansion of 4.2% in 2022 , 2.9% in 2023 and 1.6% in 2024. The opposite is true for theinflation which, explained the president, “has been significantly revised upwards” with an annual forecast of 5.1% in 2022, 2.1% in ’23 and 1.9% in ’24. ‘inflation excluding energy should reach an average of 2.6% in 2022, 1.8% in ’23 and 1.9% in ’24, also up on the December projections “.

The calendar for the end of purchases

Despite the uncertainties, the ECB has nevertheless detailed the program to exit from the extraordinary stimuli, news that has weakened the stock exchanges and caused a surge in the spread. Lagarde suggested the path of fiscal stimulus against the effects of war: “Budgetary measures, including at EU level, would help protect the economy”.

We had very intense discussions on the economic situation and the outlook. Obviously Ukraine took a lot of these discussions and there were different positions around the “board of governors” table which was unanimous on the decisions. We need a balanced approach, which aims at price stability at this stage, “Lagarde recalled.

Altaf Kassam: “Fed and ECB softer on rates to avoid the risk of stagflation”

by Eugenio Occorsio


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“On the basis of an updated assessment and taking into account the uncertain context, the Governing Council of the ECB today revised the App program, of monthly asset purchases (App) for the coming months”, put the Eurotower on paper. The Quantitative easingthe securities purchase program thus has a horizon: if the data were to support the belief “that medium-term inflation prospects will not weaken even after the end of our net purchases, the Governing Council will conclude net purchases under the App in the third quarter“.

In conference, Lagarde he remarked that “we have not decided to accelerate stabilization but to go forward step by step, to know the challenges we are facing in order to respond in an agile way at all times. On the App we use the conditional. We are dependent on data in our decisions. The Board of Governors is ready to review its purchasing decisions in terms of deadlines and also volume, we are ready to change the decisions and we are not accelerating in any way rather we confirm our approach in using maximum conditionality in maximum instability ” .

While purchases with the pandemic program will end in March, those with the App will total 40 billion in April, 30 billion in May and 20 billion in June. This is a reduction compared to the 40 billion for all the months of the second quarter, decided in December 2021. As for the third quarter – explains the ECB – “the calibration of net purchases will depend on the data and will reflect its evolving assessment of prospects” .

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Interest rates, government bonds and inflation: what changes for savers and consumers after the ECB

by Vittoria Puledda


For what concerns interest rates, today stopped, the ECB puts a little more time between the end of the purchases and the rise. “Any adjustments to the benchmark interest rates will occur sometime after the end of the net purchases under the” securities purchase program “and will be gradual,” the statement said. How much later? Lagarde is asked at the press conference: “It can mean a week or a few months”, the answer.

However, “if the medium-term inflation outlook changes and financing conditions become inconsistent” with the path to the 2% inflation target “we are ready to review our net asset purchase program in terms of size. and / or duration “. The Governing Council also intends to “continue to fully reinvest the principal payments of maturing securities purchased under the App for an extended period of time beyond the date on which it will begin to raise the key ECB interest rates and, however, as long as necessary to maintain favorable liquidity conditions and a large degree of monetary accommodation “, concludes the note.

“In simple terms, the ECB has hinted that if inflation continues to be too high, it will end the quantitative easing plan and prepare for an interest rate hike probably as early as September”, the hot comment. in a note by Filippo Diodovich, senior market strategist of IG Italia.

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