Christine Lagarde says ‘impossible’ for ECB to always guarantee 2% inflation

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Christine Lagarde, President of the European Central Bank, said that the European Central Bank has become less able to ensure that the goal of inflation is 2 percent in the short term, as policy makers forced wrestling with “high” uncertainty.

A week after the central bank, the Central Bank indicated a possible slowdown in the discounts in borrowing costs, after reducing the standard interest rate for the sixth time by a quarter of a point to 2.5 percent, Lagarde told Frankfurt that the environment has become so difficult that it would be the “impossible” guarantee “the main inflation will always be a percent.”

Comments will fuel doubts about the frequency and frequency of potential discounts in the future, after Lagarde withdrew their previous directives that “the direction of travel” – additional gradual discounts – was “clear”.

This change in the tone of the President of the European Central Bank reduced the expectations of other prices in April, with many banks now expected that the prices will be reduced by the end of the year, which was previously expected.

The target of inflation is covered by 2 percent of the European Central Bank-which was presented in 2021-term and allows short-term deviations in actual time directions.

Lagarde stressed that the goal is to make sure that “inflation is always approximately 2 percent in the medium term.” She said that this trend “enables us to avoid responding to small shocks or pass them, which will fade at a time when the effect of policy change is carried out,” adding that the European Central Bank can “control the horizon in which we must return inflation to the goal.”

The President of the European Central Bank has warned that the increase in general borrowing to finance investment in defense and infrastructure, as well as the potential trade war involved in the United States, may “feed on inflation directly and increase volatility.”

She said that the euro area may be especially weak because it “is very exposed to some new types of shock” because of its great dependence on international imports and energy.

It can create rising tariffs, as well as a batch of debt to raise spending on defense and infrastructure by Germany and other euro countries, “new -sided shocks” that can reduce inflation or accelerate inflation, according to Lagard.

“The shock trend is difficult to predict,” she said.

As a result, the European Central Bank will pay more attention to inflation. Lagarde said that the central bank can “search” for short -term shocks in the short term, such as high energy prices, as long as families and companies do not take an increase in prices in the future as a Muslim matter.

But inflation expectations have become more volatile after the recent price increases. “As soon as consumers notice high inflation, their inflation perceptions responded quickly, but they decreased more slowly when inflation began to decrease,” said Lagarde.

On interest rates, she said the European Central Bank “cannot provide certainty” around the path forward. Instead, he is looking to clarify how it can respond to certain shocks and events.