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ECB President: Inflation is not currently our benchmark. The current situation cannot be compared to that of 1970


“Inflation is not currently our benchmark. Although extremely high uncertainties could lead to a slowdown in economic growth, accompanied by high inflation, the current situation cannot be compared to that of 1970. “The head of the ECB said, informs Agerpres.

According to preliminary data released by Eurostat, the annual inflation rate in the euro area rose to 7.5% in April from 7.4% in March. It is a record high for the euro area and far exceeds the European Central Bank’s (ECB) target of 2%.

Central banks are under pressure after Russia’s invasion of Ukraine led to rising prices, hurting consumer and corporate confidence. ECB officials are determined to move forward with the process of normalizing monetary policy.

Economists expect at least two interest rate hikes this year, and some say a third hike is possible, but it all depends on how markets react to ECB decisions. Markets have already started to consider an increase in the cost of credit by 85 basis points this year, which would mean more than three increases of 25 basis points each, which would allow interest on deposits, which is currently at minus 0.5%, to return to positive territory for the first time after 2014.

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Joachim Nagel, chairman of the Central Bank of Germany (Bundesbank), said on Friday that officials should not wait too long for the decision to raise interest rates, while Francois Villeroy de Galhau, a member of the ECB’s Governing Council, said interest rates deposits could return to positive territory this year.

The ECB President reiterated that based on the data available to him, net asset acquisitions would be completed “at the beginning of the third quarter of 2022”.

Asked about interest rates, Lagarde said officials “keep all options open” and are gradually making progress with the process.

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According to data transmitted by ziuanews.ro, against the background of the war, economists are forced to abandon optimism about a recovery from the pandemic and have begun to draw a parallel between the economic situation of the 1970s and what is happening today.

In short, 50 years ago, the United States sent military equipment to Israel to resist the conflict unleashed by a significant part of the Arab countries against it. In response, OPEC is launching an embargo that would create one of the worst oil crises in history, hitting the United States hard. The embargo created a chain effect and led to a difficult time economically. The 1970s were marked by double-digit inflation and the stagnation of the growth of nations around the world, a phenomenon now known as stagflation.

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