© Reuters. A view shows the European Central Bank (ECB) flag and the flag of the European Union, on the day of the monthly news conference following the ECB’s monetary policy meeting in Frankfurt, Germany, September 14, 2023. REUTERS/Wolfgang Rattay
FRANKFURT, Sept 14 (Reuters) – The European Central Bank raised its key interest rate to a record peak on Thursday and signalled this will likely be its final move in a more-than year-long fight against stubbornly high inflation.
Following are highlights of ECB President Christine Lagarde’s comments at a news conference after the policy meeting.
RECOVERY PUSHED OUT TO 2024
“We are clearly in a period of slow and sluggish growth.”
“The difficult times are now and the recovery that we anticipated is pushed out into 2024.”
ON WAGE RISES
“We are looking very, very carefully at that because it’s having a serious impact on inflation, particularly in wage inflation in the service sector which is typically much more labour intensive.”
POLICY TRANSMISSION
“There is evidence that the current hiking cycle is transmitting to financing conditions faster than previous ones.”
IMPACT OF RATE RISES ON REAL ESTATE SECTOR
“The level of interest rates and the financing tightening that we are conducting to bring inflation down is one of the factors that cause this overall real estate sector to be in a difficult situation at the moment.
“We’re not oblivious to it, we know it. We are not driven to sustain and support a particular sector – we are driven by the imperative of delivering on our mandate which is price stability.”
CREDIBILITY TARGET
“What I know is that the ECB is on a positive path directionally”.
“My definition of credibility is that we deliver on our mandate. Our credibility is on the line to reach the 2% medium term (inflation target) in a timely manner.”
“You have a mandate, you have to deliver against a mandate.”
NOT SAYING WE’RE AT PEAK
“We are not saying we are now at peak,
“I think the sentence I read is the critical one – with today’s decision we have made sufficient contributions under current assessment to returning inflation to target in a timely manner.”
WHAT IS ‘LONG ENOUGH’?
“Did (the Governing Council) discuss ‘long enough’? The answer to that is no. Because we also say in the same breath that we will be data dependent.”
NO PEPP, APP SALE DISCUSSION
“We have not discussed the PEPP (pandemic emergency purchase programme) programme and the reinvestment and the forward guidance. PEPP is our flexibility instrument and is the first line of defence if we want to defend proper transmission of our monetary policy.
“We have not either discussed any kind of APP (asset purchase programmes) outright sale.”
SLUGGISH GROWTH
“We are going through a period of about five quarters of very, very sluggish growth.”
GROWTH RISKS
“The risks to economic growth are tilted to the downside. Growth could be slower if the effects of monetary policy are more forceful than expected or if the world economy weakens, for instance owing to a further slowdown in China.
“Conversely, growth could be higher than projected if the strong labour market, rising real incomes and receding uncertainty mean that people and businesses become more confident and spend more.”
SOME GOVERNORS WANTED TO PAUSE
“Some governors would have preferred to pause and reserve a future decision once more certainty, more intelligence has resulted from the passing of time and the impact of our many previous decisions.
“But I can tell you there was a solid majority of the governors to agree with the decision we have made.
“There are a few members of the Governing Council who would have preferred another one. We had to rely on a solid majority.”
INFLATION RISKS
“Upside risks to inflation include potential renewed upward pressures on the cost of energy and food, adverse weather conditions, and the unfolding climate crisis broadly could push food prices up by more than expected.”
RESILIENT LABOUR MARKET
“The labour market has so far remained resilient despite a slowing economy.”
INFLATION
“Inflation continues to decline, but is still expected to stay too high for too long.”
WEAKER SERVICES
“The services sector, which had so far been resilient, is now also weakening.”
PICK-UP OVER TIME
“Over time, economic momentum should pick up, as real income are expected to rise, supported by falling inflation, rising wages, and a strong labour market. And this will underpin consumer spending.”
SUBDUED ECONOMY
“The economy is likely to remain subdued in the coming months. It broadly stagnated over the first half of the year.”
(Reuters Global News Desk)
