FRANKFURT – Eurozone governments should start rolling back support measures aimed at cushioning the impact of energy prices to avoid fiscal larg feeding inflation, European Central Bank President Christine Lagarde said. Said Thursday.
His comments underscore rising tensions between monetary and fiscal officials as the eurozone grapples with an unprecedented cost-of-living crisis.
“As the energy crisis has become less acute, it is now important to begin withdrawing these measures immediately, in a concerted manner and to bring down energy prices,” Lagarde said. For the full year of 2023 at a time when energy prices were much higher than they are today.
Lagarde reiterated previous warnings that fiscal measures aimed at protecting the economy from higher energy prices that are not temporary and consistent with preserving incentives to consume less energy “are likely to drive medium-term inflationary pressures”. , which will call for a stronger monetary policy response.”
The ECB president’s comments came after the central bank raised of 0.5 percentage points in interest rates and promised a similar increase in March.
Eurogroup chief Paschal Donohoe attended the ECB Governing Council dinner on Wednesday, Lagarde said, “It is a very good opportunity to appreciate how the Eurogroup at the finance minister level is going to look … to adjust fiscal support.” Recommending reevaluation for lower energy prices that we don’t see yet.
Lagarde often Responsible Fiscal and monetary policy are working hand in hand, from Europe’s success in saving the economy from the abyss during the pandemic. But there are governments in the battle of inflation less inclined Staying in lockstep with the ECB, laying out support measures to help consumers and businesses cope with the energy and cost-of-living crisis that are so wide-ranging that they could compound the price pressures.
“The well-known fiscal stimulus, which has eased recession fears, is actually an additional concern for the ECB as it could turn the issue of supply-side inflation into demand-side inflation,” said ING economist Carsten Brzeski. ,