Lagarde: Inflation has broadened, is undesirably high, and is a major challenge

Inflationary pressures are expanding and have remained undesirably high, which is a major challenge; Lagarde added that economic activity would be affected in the short term due to higher energy costs as the wars in Ukraine and recent lockdowns in China have made the supply chain in a worse.

Lagarde added that the ECB needs to ensure that fragmentation doesn’t prevent the transmission of its monetary policy, reported Reuters. If necessary, the ECB can deploy new instruments to tackle fragmentation, she added. 

President Christine Lagarde gave an unconvincing response, where she essentially just repeated the commitment the ECB made to prevent fragmentation that might impair the transmission of its monetary policy. Various commentators on Twitter accused Lagarde of not wanting to admit that the ECB hasn’t yet created an actual monetary policy tool to prevent transmission. 

EUR/USD now looks volatile after hitting tops in the 1.0770 region on Thursday.

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