Lagarde warns against overreacting to temporary price shock

ECB President Christine Lagarde said that the European Central Bank should be cautious of withdrawing stimulus too quickly, a statement by which Lagarde has distanced the European Central Bank from the move towards tighter monetary policy by many other central banks.
ECB sees inflation going further above 3%, but expected to be slowing in 2023. Lagarde reasserted her view that inflation is not getting out of control in the Eurozone.

According to Lagarde, the ECB must keep monetary policy loose and not overreact to temporary price spikes in order to ensure inflation returns to its target.

Opening a two-day conference on monetary policy after the end of the pandemic, Lagarde said policymakers should focus on steering the economy safely out of the crisis.

“The key challenge is to ensure that we do not overreact to transitory supply shocks that have no bearing on the medium term, while also nurturing the positive demand forces that could durably lift inflation towards our 2 percent inflation target,” Lagarde added.