European Central Bank Leader Christine Lagarde said that monetary policy makers should not give up their efforts even if inflation seems to have peaked.
Speaking at a panel at the World Economic Forum held in Davos on January 20, Lagarde said, “We must continue this process of resilience that we observed in 2022. My motto for monetary policies is ‘don’t change your course’.”
Lagarde and some of his ECB colleagues are known to be against the proposals that the pace of rate hikes should be slowed after a half-point move expected next month.
While headline inflation fell back to single digits, core price increases hit a record high in December. On the other hand, the economy proves its resilience despite rising interest rates.
ECB Steering Committee member Klaas Knot said on Thursday there will be more than one half-point hike in interest rate decisions. His French colleague, Francois Villeroy de Galhau, said that interest rates should peak until summer and then remain at this level for a while.
Lagarde warned that massive and unfocused government spending to protect households and businesses from the power crisis could prompt further action by the ECB if it boosts inflation.
“I hope fiscal policy will not work cyclically against monetary policy in 2023. We don’t need to be forced to do more than is necessary,” said the ECB President.