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The next is a transcript of an interview with Christine Lagarde, president of the European Central Financial institution, that aired Sunday, April 24, 2022, on “Face the Nation.”
MARGARET BRENNAN: We’re joined now by Christine Lagarde, the president of the European Central Financial institution, which units financial coverage, together with rates of interest for the 19 nations that use the euro as a foreign money. Madame Lagarde, welcome to this system.
PRESIDENT OF THE EUROPEAN CENTRAL BANK CHRISTINE LAGARDE: Thanks a lot And good morning.
MARGARET BRENNAN: Good morning. Good to have you ever again right here in Washington. We discuss usually about inflation on this nation, however inflation can also be at a report excessive in Europe. The Federal Reserve chair has talked about elevating rates of interest on this nation subsequent month by as a lot as half a % to attempt to get management right here. Why do you suppose you’ll be able to wait till the summer season?
LAGARDE: I consider that we share the identical resolve, which is to tame inflation, which is to make use of all of the instruments that now we have to take action. However we face a unique beast. After I take a look at my core inflation, which is inflation taking out essentially the most risky parts akin to power and meals, my core inflation is at 2.9%. Inflation in Europe may be very excessive in the meanwhile. Fifty % of that’s associated to power costs. Pre-Ukraine warfare, it was already climbing, however the Ukraine warfare has dramatically elevated these costs. So now we have to make use of the instruments and the sequence, which is suitable relying on the sources of inflation. If I increase rates of interest right now, it isn’t going to convey the worth of power down. So now we have launched into that journey of step by step eradicating accommodative financial coverage. So we shall be interrupting the purchases of property in the midst of the third quarter. Excessive chance that we accomplish that early within the third quarter. After which we are going to take a look at rates of interest and the way and by how a lot we hike them. However now we have to be data-dependent due to the sources of inflation that now we have in the meanwhile.
MARGARET BRENNAN: You might have mentioned power, excessive power and insecurity might be persistent right here. Does that point out a excessive diploma of concern that we might be tipping right into a recession? And might you increase charges with out that danger?
LAGARDE: It is the tradeoff that Central Financial institution governors face in the meanwhile. Now we have to be guided by our mandate, by our goal, which is to revive worth stability, which now we have all outlined as roughly 2%. In order that’s- that is the mandate. However on the similar time, now we have to take action in a sufficiently well-sequenced, well-calibrated, for us in Europe, gradual manner in order that we do not induce recession. We at the moment are dealing with, you understand, winds that scale back development and enhance inflation. So now we have to navigate between the 2, guided by the mandate of worth stability and bringing inflation down.
MARGARET BRENNAN: You’ve got referenced the warfare with Russia just a few occasions right here, and we have all been studying simply how dependent Europe is on Russia for its provide of fossil fuels. Germany warned an embargo of Russian gasoline might trigger financial output to drop 5%, and but there are requires whole embargoes on Russian gasoline. I imply, is- is that this sensible? And the way a lot is the politics impacting this?
LAGARDE: , I feel now we have to be guided by the aim that now we have. And the aim now we have is to scale back and probably cancel the financing that’s supplied to Russia to finance the warfare, the unjustifiable, illegitimate warfare of Russia in opposition to Ukraine. So now we have to regulate the insurance policies, whether or not it’s sanctions, whether or not it’s de-SWIFTing the banks, whether or not it’s slicing out the oligarchs from the property and their sources of financing, whether or not it’s lowering and finally slicing out provides from Russia in such a manner that we truly attain the purpose now we have, which is to scale back financing. If we had been to take abrupt measures that will induce a rise of the worth of oil or gasoline all over the world from which the Russians would finally profit, then that will not be the best coverage transfer. So now we have to do it in a sufficiently sensible and refined manner in order that we truly obtain the purpose that now we have, which is to scale back the financing. And I feel that is what the Europeans collectively are taking a look at. The plan to fully boycott coal has been adopted. There’s quite a lot of work happening regarding oil, regarding gasoline. And, you understand, there shall be extra tales to inform a bit in a while.
MARGARET BRENNAN: , on this nation, there’s quite a lot of debate round how a lot the federal government is accountable versus the central bankers for the inflation that we’re experiencing. The US spent $6 trillion on COVID aid, $2 trillion of it on President Biden’s watch final spring when the economic system was already recovering. Do you suppose a few of this spending within the US exacerbated inflation as a result of Europe did not spend like this?
LAGARDE: We spent- we in Europe spent much less in stimulus. And I feel we spent otherwise. We spent just about half as a lot as what the US authorities spent on the stimulus and heating up the economic system. However we additionally spent it otherwise as a result of I feel the main focus was predominantly on retaining the roles, not essentially sending the checks. And on account of that, individuals who managed to maintain their jobs alive, whereas not essentially, you understand, going to work as a result of COVID stopped all people from going to work sooner or later in time, they’d their job. So when COVID was over, they went again to their job. So I feel that the- the- the labor market that you’ve got at the moment on this nation, within the US, which is extremely tense, the place you have got, you understand, quite a lot of jobs that aren’t crammed, the place you have got loads of vacancies, we do not have that in Europe in the meanwhile. And the present scenario you have got on the labor market right here within the US is clearly contributing to doable sturdy inflation and second spherical impact the place costs go up, wages go up, quick provide of labor, wages proceed to go up, and that feeds again into costs. That- that is one of many variations between our two economies.
MARGARET BRENNAN: You’ve got been in key positions all through quite a few financial crises. How harmful is that this second that we’re in proper now?
LAGARDE: It’s a tough second, nevertheless it’s one the place a really attention-grabbing phenomenon developed. If I look from my vantage level at Europe, the Russian aggression in opposition to Ukraine has produced three key outcomes. It has resurrected NATO. That is Easter Day. So I am not- I am not, you understand, fantasizing right here, nevertheless it has resurrected NATO. It has united the Europeans greater than ever and it has strengthened a nation, Ukraine. The worth of that’s horrible. The loss of life, the destruction, the devastation. And we’re all involved and all wish to assist.
MARGARET BRENNAN: OK.
LAGARDE: However that is fairly an attention-grabbing growth. And now we have to be united and resolved to truly handle the scenario collectively as a result of—
MARGARET BRENNAN: I’ve to—
LAGARDE: —there must be solidarity.
MARGARET BRENNAN: I’ve to finish it there as a result of we’re out of time. We’ll be again.
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