EU central bank warns ‘outlook is darkening’
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 Parliament’s Committee on Economic and Monetary Affairs on Monday, Lagarde admitted that “inflation remains far too high and is likely to stay above our target for an extended period.”
The former IMF boss warned that the “economic consequences for the euro area” of “Russia’s unjustified war of aggression on Ukraine” had spiraled further since June, a reference to Western sanctions on Russian oil and gas, which have sent fuel prices skyrocketing.
“The outlook is darkening,” she said.
While the Eurozone economy grew 0.8% in the second quarter, Lagarde said the ECB expected activity to “slow substantially” 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 quarter’s economic growth was due to “strong consumer spending” 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 “worsening terms of trade.”