European Central Bank (ECB) President Christine Lagarde made a statement to the press in Berlin after the ECB Governing Council increased the three main policy rates by 25 basis points each, in line with market expectations, at its September meeting.
Lagarde, who started her speech by announcing monetary policy decisions, answered journalists' questions after making a comprehensive presentation on the effects of economic growth and the increase in energy prices triggered by conflicts in the Middle East on inflation trends.
Stating that the Eurozone economy is more resilient than expected despite energy shocks, Lagarde noted that shocks in energy prices and global trade tensions continue to pose risks to growth.
Stating that the tension in the Middle East continues to put pressure on prices, Lagarde said, "Conflicts in the Middle East continue to create inflationary pressures and inflation is expected to remain well above the target for a long time." he said.
Lagarde emphasized that short-term inflation expectations are high, but they foresee stability in the medium term, and stated that there will be a slightly lower but longer-lasting inflation process than expected.
ECB President Lagarde underlined that they are determined to adjust monetary policy to reach the inflation target of 2 percent.
Explaining that they took today's interest rate decision unanimously as the Governing Council, Lagarde said, "This decision was a clear step that leaves no need for discussion. Uncertainties regarding the economic outlook continue to remain high. The risks continue to be upward on the inflation side and downward on the economic growth side. However, we are in a good position against the risks posed by geopolitical conflicts." he said.
"The resilient course of the economy and inflation data created a surprise"
Christine Lagarde emphasized that they did not discuss possible future steps in today's meeting and said, "We do not say that we are constantly focusing on data in order not to squeeze the market. However, the situation is so variable that there is no point in looking too far ahead. The next step is unpredictable. We are completely focused on the data that will come our way." he said.
Stating that the ECB Governing Council was surprised by both the resistance of the Eurozone economy and the inflation figures, Lagarde stated that they expected more pressure on food prices. However, overall inflation is still likely to remain higher for longer than initially anticipated, Lagarde said, adding that both driving factors are included in the bank's forecasts.
"We are closely monitoring the activity in the bond market"
Pointing out that the rise in bond yields in global markets is a new situation and is experienced for different reasons in all global markets, Lagarde continued as follows:
"One of the biggest reasons is the changes in the balance of supply and demand. The increasing need for companies to obtain financing through the bond market is effective. In addition, artificial intelligence investments have become an important driving factor for the global bond markets. We think that the size of the US bond market also plays a role in this mobility. As the ECB, we follow the situation in the bond market very closely, especially in terms of long-term interest rates."
Lagarde refrained from commenting on a question about yield differences in government bonds, stating that they monitor these differences, but that this is outside her area of responsibility.
US Treasury Department's foreign exchange intervention and the digital euro
Answering the question about the US Treasury Department's latest intervention in the foreign exchange market by selling euro reserves in order to prevent the depreciation of the yen, Lagarde reiterated that the intervention took place, but refused to comment further on the issue.
Emphasizing that she attaches great importance to the digital euro project, Lagarde said, "Digital central bank money is a necessity in the digital age. This step will also make Europe less dependent on actors outside the Eurozone. Existing payment infrastructures are potentially fragile and vulnerable." he said.
Allegations of support for the common currency and resignation
When asked about the rise of populist and far-right parties in the Eurozone and the future of the common currency being discussed, Lagarde argued that public support for the common currency, the euro, is at the highest level in history.
Lagarde also announced that the ECB will share with the public the new results obtained from three different scenario analyzes in the coming days.
Lagarde, whose term of office will expire in the autumn of 2027, responded to the allegations that she would leave early, saying, "If there were any developments regarding my personal future, it would be announced immediately. There is nothing to announce at the moment." he said.
On the other hand, German Central Bank (Bundesbank) President Joachim Nagel, who was present at the meeting, also expressed his "concern" about the rise of populist and far-right parties.
