Lagarde acknowledged that central banks underestimated inflation and its “persistence”

Lagarde acknowledged that central banks underestimated inflation and its “persistence”

The president of the European Central Bank (ECB), Christine Lagarde, acknowledged that the organization, like the central banks, underestimated both “the dynamics of the inflation like its persistence.

This was stated in a speech delivered at the Distinguished Speakers Seminar organized by thel European Economic and Financial Center, in which the French company has reiterated the 2% inflation target.

During her speech, focused on political communication, Lagarde pointed out the importance of generating trust in the central banks and that citizens perceive that they are capable of fulfilling their mandate of restore price stability.

“To meet that mandate, we have increased our monetary policy rates by a cumulative 425 basis points over the space of 12 months, a record pace in record time. We will achieve a timely return of inflation to our medium-term target 2%,” he confirmed.

But, as he has stated, this action must be supported by communication and, in this sense, the ECB has two ways to improve it and to support its monetary policy movements: “More accessibility and more humility.”

Inflation: how communication influences the task of central banks

“He accessible language it also increases the benefits of a clear inflation target. the effects of to inform the people about our target tend to last longer if the information is accompanied by explanations of the justification for that target and its implications for how monetary policy can stabilize the economy,” the ECB headline stressed.

Likewise, “the modesty in the way we communicate is key to building trust. To restore confidence in specialized institutions, we must make a best job to transmit the uncertainty we face and the inherent challenge of forward-thinking policymaking in this environment,” he said.



The ECB president insisted that it is essential not only to take decisive action to reduce inflationbut also to communicate effectively to ensure that the inflation expectations in the medium term remain anchored during the process.

“More than ever, credibly conveying that inflation will return to our 2% medium-term target has been vital in helping to prevent self-fulfilling inflationary dynamics from taking hold,” he said.

“The current environment presents central banks with both a risk and an opportunity: people are now paying more attention to inflation, which may increase the risk of undue of inflation expectations; But because of that increased attention, they may be more willing to listen to us, giving us a valuable window of time to deliver our key messages,” Lagarde concluded in his speech.

Source: Ambito

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