RT.com
23 Mar 2023, 19:43 GMT+10
The burden will ultimately be shared between firms and workers, the head of the European Central Bank warns
The euro area won't be able to recover massive terms-of-trade losses incurred by rising energy prices, European Central Bank (ECB) President Christine Lagarde said during a conference at Frankfurt's Goethe University on Wednesday.
According to the head of the bloc's regulator, the cost of those losses must ultimately be shared between firms and workers.
"And it is important that there is fair burden-sharing between them, with both accepting that they cannot fully recover the income that the euro area has paid to the rest of the world and the ensuing loss of output," Lagarde explained.
She added that the Eurozone has been hit by an inflation shock that is currently working its way through the entire economy.
"While headline inflation is likely to decline steeply this year, driven by falling energy prices and easing supply bottlenecks," Lagarde concluded, "underlying inflation dynamics remain strong."
The official outlined that an unprecedented series of negative supply shocks that battered the single currency area had been triggered by factors such as pandemic-induced disruptions and the energy crisis evoked by the EU's attempts to build up sanctions pressure on Russia over Ukraine.
On the other hand, she said, the EU member states faced a positive demand shock after the reopening of economies in the wake of the Covid-19 pandemic.
"That favorable demand environment allowed firms to pass rising input costs through to prices much faster and more strongly than in the past," Lagarde pointed out.
She noted that future interest-rate hike decisions would depend on incoming data, above all whether the regulator could see signs that painfully high inflation is headed convincingly down.
"With high uncertainty, it is even more important that the rate path is data-dependent," the ECB chief said. That means "we are neither committed to raise further nor are we finished with hiking rates."
Lagarde pledged to deliver price stability, bringing inflation back to 2% over the medium term at all costs.
For more stories on economy & finance visit RT's business section
(RT.com)
Get a daily dose of Europe Sun news through our daily email, its complimentary and keeps you fully up to date with world and business news as well.
Publish news of your business, community or sports group, personnel appointments, major event and more by submitting a news release to Europe Sun.
More InformationMADRID, Spain: Liverpool footballer Diogo Jota and his younger brother, André Silva, have died in a car accident in Spain. Spanish...
LONDON, U.K.: An unrelenting heatwave sweeping across Europe has pushed early summer temperatures to historic highs, triggering deadly...
President Donald Trump's plans to build a space-based Golden Dome missile defense shield have drawn immediate criticism from China,...
NEW YORK CITY, New York: Paramount has agreed to pay US$16 million to settle a lawsuit brought by U.S. President Donald Trump over...
LONDON, U.K.: British Prime Minister Keir Starmer won a vote in Parliament this week to move ahead with changes to the country's welfare...
WASHINGTON, D.C.: President Donald Trump will meet Israeli Prime Minister Benjamin Netanyahu at the White House on Monday. President...
FRANKLIN, Tennessee: Hundreds of thousands of Nissan and Infiniti vehicles are being recalled across the United States due to a potential...
REDMOND, Washington: Microsoft is the latest tech giant to announce significant job cuts, as the financial strain of building next-generation...
LONDON UK - U.S. stock markets were closed on Friday for Independence Day. Global Forex Markets Wrap Up Friday with Greeback Comeback...
SANTA CLARA, California: Nvidia came within a whisker of making financial history on July 3, briefly surpassing Apple's all-time market...
SACRAMENTO, California: California's multibillion-dollar farms are facing a growing crisis—not from drought or pests, but from a sudden...
WASHINGTON, D.C.: President Donald Trump says the United States could soon reach a trade deal with India. He believes this deal would...