faced-with-inflation,-europe-and-the-united-states-diverge

Faced with inflation, Europe and the United States diverge

Challenges World

NATACHA VALLA, Dean of the School of Management and Innovation at Sciences-Po.

By Challenges.fr the 22.01.2022 at 09h09 Playback 3 min. Subscribers

While the US Federal Reserve will raise its key rates, the ECB has decided to temporize. His fear: that a surge in wages will lead to an inflationary spiral.

The ECB intends to maintain the course of a monetary policy based on a gradualist approach, unlike the Fed.

Francois Lenoir

What will the European Central Bank do? With the approach of the meeting of the board of governors, scheduled for February 3, many experts are wondering about the monetary strategy that the Frankfurt institution will have to adopt. There is no doubt that the publication of an inflation rate of 5% over one year in the euro zone – its highest level in the last twenty-five years – puts pressure on the ECB. This questioning seems all the more justified since the latter has embarked on a course opposite to that of the American Federal Reserve in the face of the resurgence of the rise in prices.

Without totally excluding the possibility, Christine Lagarde estimated during her last press conference, last December, t very little likely that the ECB will raise its key rates this year. In addition, even if it had then confirmed the end of its pandemic emergency asset purchase program (PEPP), endowed with an envelope of 1.8 billion euros, the ECB intends to maintain the course of a monetary policy based on a gradualist approach. Conversely, the Fed continues to vigorously reaffirm the tightening of its monetary policy that began several months ago. It has just clearly announced the color for 2021, with three possible interest rate hikes.

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