- High energy prices, heightened supply interruptions, and increased uncertainty are weighing on the euro area’s economy
- Inflation has accelerated and is standing @ 8.1 percent in May
- Aim to increase key rates by 25 basis points at the July policy meeting
- In favour of regulating cryptocurrency-related activities including lending and staking
Christine Lagarde, President of the ECB, said that Russia’s unjustified aggression against Ukraine is seriously affecting the euro area economy and that there is still a lot of uncertainty surrounding the future. She was speaking at the hearing of the Committee on Economic and Monetary Affairs of the European Parliament. However, the circumstances are favourable for the economy to expand and continue to improve over the medium term.
Ms Lagarde stated that governments have acted to reduce energy inflation and that fiscal policy is assisting in reducing the effects of the war. Next Generation EU development programme i.e. the ‘Fit for 55’package, and REPowerEU plan, once fully implemented will strengthen the euro.
It is anticipated that the negative effects of rising energy prices i.e. worse trade terms, increased uncertainty, and high inflation on discretionary income will eventually lessen. She emphasised that inflation has accelerated and is standing @ 8.1 percent in May. Prices for energy are currently 39.2 percent higher than they were a year ago. May saw a 7.5% increase in food costs, mostly due to the Russia and Ukraine being major global producers of agricultural products.
High energy prices, heightened supply interruptions, and increased uncertainty, which specifically harm the industrial sector, are all weighing on the euro area’s economy.
Eurosystem staff have significantly increased their baseline inflation estimates. According to these predictions, inflation will likely continue to be unfavourably high for some time. Eurosystem staff predict that annual inflation would be 6.8 percent in 2022, then drop to 3.5 percent in 2023 and 2.1 percent in 2024. This indicates that headline inflation is anticipated to be marginally higher than ECB target at the end of the projection horizon.
The European Central Bank (ECB) President Christine Lagarde stated that they aim to increase key rates by 25 basis points at the July policy meeting when testifying before the Committee on Economic and Monetary Affairs of the European Parliament.
Christine Lagarde also advocated in favour of regulating cryptocurrency-related activities including lending and staking. Lagarde, who is also the chair of the European Systemic Risk Board (ESRB), emphasised that the proposed regulations on cryptocurrencies are “narrowly defined” and that upcoming legislation should govern the activities of crypto asset staking and lending, which are rising.
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