EU central bank warns âoutlook is darkeningâ
The ECB has slashed growth forecasts, hiking interest rates even as it predicts inflation will climb further
Europe is facing lower-than-expected economic growth as inflation continues to climb, European Central Bank chief Christine Lagarde revealed on Monday, explaining that the ECB had raised interest rates by 75 basis points in an attempt to control soaring prices.
Speaking before the European Parliamentâs Committee on Economic and Monetary Affairs on Monday, Lagarde admitted that âinflation remains far too high and is likely to stay above our target for an extended period.â
The former IMF boss warned that the âeconomic consequences for the euro areaâ of âRussiaâs unjustified war of aggression on Ukraineâ had spiraled further since June, a reference to Western sanctions on Russian oil and gas, which have sent fuel prices skyrocketing.
âThe outlook is darkening,â she said.
While the Eurozone economy grew 0.8% in the second quarter, Lagarde said the ECB expected activity to âslow substantiallyâ over the rest of 2022, to a total of 3.1% over the year and a mere 0.9% for all of 2023. Things will improve marginally in 2024, with growth projected at 1.9%, she said.
Much of this quarterâs economic growth was due to âstrong consumer spendingâ driven by the reopening of Covid-shuttered industries like tourism, Lagarde said, while noting a decline in global demand due to what she called the âworsening terms of trade.â