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FRANKFURT: European Central Bank president Christine Lagarde said Thursday that a “mild” eurozone recession was looming but would not be enough to bring down record-high inflation.

Inflation in the 19-nation currency club surged to 10.7 percent in October, more than five times the ECB’s two-percent target, as Russia’s war in Ukraine drives energy prices higher.

Speaking at a banking conference in Riga, Lagarde said “a mild recession” was possible in late 2022 and in early 2023, as soaring consumer prices and the continent’s energy crisis dampen economic activity.

“But we do not believe that that recession will be sufficient to tame inflation,” she warned, indicating that more interest rate hikes were coming.

The ECB last week unveiled another jumbo interest rate hike of 75 basis points, the second such move since September and the third rate increase since July, after a decade of historically low borrowing costs for the euro region.

Lagarde has warned that higher borrowing costs could deepen the pain of an economic downturn, but the ECB – like other central banks – is for now prioritising the fight against inflation.

ECB can’t just mirror Fed moves, Lagarde says

In the United States, the Federal Reserve on Wednesday lifted its rates to their highest level in 15 years and signalled that further increases would follow.

“We have to be mindful of each other and we have to be attentive to potential spillovers and spill backs, as I think the Fed is also mindful of,” Lagarde said.

ECB board member Fabio Panetta cautioned that the Frankfurt institution had to pay “close attention” to the impact of more expensive borrowing costs on households and consumers as the economic outlook darkens globally.

“A bigger-than-expected rate increase may heighten volatility and have a stronger impact in the current highly leveraged environment after a decade of very low rates and ample liquidity,” he said at a finance conference in Frankfurt.

“When calibrating our stance, we need to pay close attention to ensuring that we do not amplify the risk of a protracted recession or trigger market dislocation,” Panetta added.

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samir sardana Nov 03, 2022 09:07pm
CLEAR SIGN THAT ECB WANTS TO GRIND THE EU PEOPLE ,AND INDUSTRY TO PULP ECB WILL KEEP HIKING,EVEN IF UD FED STOPS THIS WILL PUSH UP THE EURO-DOLLAR,,AND BRING MORE DOOM,TO EUROUNION EXPORTERS ! WHAT IS THE AGENDA ? THE AIM IS TO CHANGE,THE LIFE PATTERNS OF THE EUrO PEOPLE,AND PUSH THEM INTO A RENEWABLE ENERGY LIFE WITH CARBON TAX + LOWER PENSIONS + MORE MIGRATION + LONGER WORKING HOURS + HIGHER RETIREMENT AGE + A SECURITY STATE (WITH LITTLE LIBERTY) ! ENERGY SECURITY, IS THE TRANSCENDENT RISK,FOR EU ! ECB IS USING PUTIN AND THE INFLATION BOGEY, TO PUSH THE EU DENIZENS,INTO A "NEW WORLD" AND A "NEW LIFESTYLE" ! dindooohindoo
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