October 7, 2022

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ECB Lin sees double risks of rising inflation and economic slowdown

ECB Lin sees double risks of rising inflation and economic slowdown

Philip Lane, chief economist at the European Central Bank.

Bloomberg | Bloomberg | Getty Images

European Central Bank Chief Economist Philip Lane said the Frankfurt Corporation should remain vigil over the coming months with the potential for rising inflation and the risks of a consumer-led slowdown in the region.

“With uncertainty, we have to manage both risks,” Lin, who is also a member of the bank’s board of directors, told CNBC’s Annette Weisbach on Tuesday at the ECB’s Sintra Forum in Portugal.

“On the one hand, these may be forces that keep inflation higher than expected for a longer period. On the other hand, we have the risk of a slowdown in the economy, which would reduce inflationary pressure,” he added.

“So it has a clear vision for the next two meetings, and we have a tendency to move away from the very low rates we’ve had for a few years, but also fully respect the importance of relying on data. It reserves the option to respond to what we see in the coming months.”

All eyes are on the European Central Bank for a crucial meeting next month. The central bank said it will raise interest rates for the first time in 11 years, but investors are more interested in understanding what the European Central Bank is doing to tackle retail risks in the region.

The central bank of the eurozone held an emergency meeting earlier this month as borrowing costs for the so-called peripheral European countries soared. The European Central Bank said it would work on developing a new tool to address these risks – however, it left markets wondering when the tool will be implemented and how far it will go.

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These talks come at a time of widespread concern about the Eurozone economy. Inflation is high and growth prospects are deteriorating.

“Can you really push interest rates into a recession even if inflation is high? That would be unusual,” Eric Nielsen, chief global economist at UniCredit, told CNBC on Tuesday.

The European Central Bank confirmed in early June its intention to raise interest rates next month Then again after the summer. This will likely bring the ECB’s deposit rate back from negative territory and represents a huge moment for the central bank, which has kept interest rates below zero since 2014.

However, there are questions about whether Lagarde will follow through with multiple rate hikes as the region’s growth outlook grows bleaker.

The European Central Bank forecast in June a GDP rate of 2.8% for the eurozone this year, but economists are starting to talk about the possibility of a year-end recession on the back of the Russian invasion of Ukraine and the impact it is having on the world. Economie.