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ECB President Christine Lagarde: "It will take some time before the negative consequences of the pandemic are eliminated"
Photo: Kai Pfaffenbach / REUTERS
The monetary policy of the European Central Bank (ECB) should remain extremely loose for a long time.
Central bank chief Christine Lagarde announced this at her regular press conference on monetary policy.
Even after the current crisis phase, the ECB will support the eurozone economy.
Shortly before, the ECB Council had decided to leave the key interest rate at zero percent.
It is clear that inflation is currently not a horror for the ECB.
One will tolerate the increase in consumer prices beyond the targeted target of two percent for a long time, said the President - how long that will be, she left open.
"Today's decision by the Governing Council shows that the changed monetary policy strategy not only brings new rhetoric, but also a change in the matter," says Friedrich Heinemann, head of the corporate taxation and public finance research department at ZEW Mannheim.
"With the revised interest rate policy outlook, the ECB is immunizing its negative interest rates and bond purchases against a surprisingly strong rise in inflation for a long time to come."
Alexander Krüger, chief economist at Bankhaus Lampe, expects that the era of ultra-low interest rates will last even longer.
"A turnaround in the key interest rate is not only a long way off, it has even been stretched over time."
Lagarde is thus increasing its leeway to keep interest rates low for a long time and to continue its bond purchase program.
This is likely to cause criticism, especially in Germany.
Here, because of the upswing, inflation is higher than the euro zone average;
In addition, Germans are particularly sensitive when it comes to inflation.
In fact, the low interest rates are poison for savings books that Germans love so much;
on the other hand, the monetary policy of the ECB ensures that companies can borrow money cheaply in order to grow and create jobs.
And the central bank makes it easier for the finance ministers of the euro zone to launch growth programs and to give expensive gifts to the electorate.
Lagarde sees greater uncertainty due to the delta variant
The inflation rate in the euro area was 1.9 percent in June. Experts assume that inflation will rise again in the coming months and could even reach three percent or more in the second half of the year. This increase has different causes. On the one hand, the increase is also due to the fact that prices were lower in the second half of 2020 because they were depressed by the temporarily lower value added tax in Germany. This effect has now been reversed.
In addition, due to the very strong recovery of the global economy in many places, numerous industries are struggling with material shortages. For weeks, for example, there have been wide-ranging bottlenecks in building materials or microchips - and as a result, prices have risen. Energy prices are also rising sharply because crude oil is now much more expensive than it was a year ago.
Lagarde's comments in connection with the pandemic made people sit up and take notice. The spread of the delta variant is increasingly "a source of uncertainty," said the Frenchwoman. And she added: "It will take some time before the negative consequences of the pandemic are eliminated." Of course, Lagarde could not say when that would be the case and when the pandemic would lose its horror. "The Monetary Policy Council consists mainly of economists and lawyers, not virologists," she said. It is therefore clear that the ECB will not cut back on its bond purchases for the time being, with which it is also keeping interest rates low in the euro zone.
Economist Heinemann from ZEW is critical of the new strategy and its implementation.
»It is striking how selectively the ECB is aware of current developments.
While the risks of new waves of infection are apparently being given a lot of attention, there is little interest in the unmistakable signals that parts of the economy are beginning to overheat. "In practical terms, all of this means the continuation of zero and negative interest rates" until at least 2023 ".
baz / hej