The next is a transcript of an interview with Christine Lagarde, president of the European Central Financial institution, that aired Sunday, April 24, 2022, on “Face the Nation.”
MARGARET BRENNAN: We’re joined now by Christine Lagarde, the president of the European Central Financial institution, which units financial coverage, together with rates of interest for the 19 international locations that use the euro as a forex. Madame Lagarde, welcome to this system.
PRESIDENT OF THE EUROPEAN CENTRAL BANK CHRISTINE LAGARDE: Thanks a lot And good morning.
MARGARET BRENNAN: Good morning. Good to have you ever again right here in Washington. We speak usually about inflation on this nation, however inflation can be at a document excessive in Europe. The Federal Reserve chair has talked about elevating rates of interest on this nation subsequent month by as a lot as half a p.c to attempt to get management right here. Why do you assume you possibly can wait till the summer season?
LAGARDE: I imagine that we share the identical resolve, which is to tame inflation, which is to make use of all of the instruments that we’ve to take action. However we face a unique beast. After I have a look at my core inflation, which is inflation taking out essentially the most unstable parts reminiscent of vitality and meals, my core inflation is at 2.9%. Inflation in Europe may be very excessive in the meanwhile. Fifty p.c of that’s associated to vitality costs. Pre-Ukraine battle, it was already climbing, however the Ukraine battle has dramatically elevated these costs. So we’ve to make use of the instruments and the sequence, which is suitable relying on the sources of inflation. If I elevate rates of interest right this moment, it’s not going to convey the value of vitality down. So we’ve launched into that journey of steadily eradicating accommodative financial coverage. So we can be interrupting the purchases of property in the middle of the third quarter. Excessive chance that we achieve this early within the third quarter. After which we are going to have a look at rates of interest and the way and by how a lot we hike them. However we’ve to be data-dependent due to the sources of inflation that we’ve in the meanwhile.
MARGARET BRENNAN: You could have stated vitality, excessive vitality and insecurity could possibly be persistent right here. Does that point out a excessive diploma of concern that we could possibly be tipping right into a recession? And may you elevate charges with out that danger?
LAGARDE: It is the tradeoff that Central Financial institution governors face in the meanwhile. We’ve to be guided by our mandate, by our goal, which is to revive worth stability, which we’ve all outlined as roughly 2%. In order that’s- that is the mandate. However on the identical time, we’ve to take action in a sufficiently well-sequenced, well-calibrated, for us in Europe, gradual approach in order that we do not induce recession. We at the moment are dealing with, you realize, winds that scale back progress and improve inflation. So we’ve to navigate between the 2, guided by the mandate of worth stability and bringing inflation down.
MARGARET BRENNAN: You’ve got referenced the battle with Russia a couple of occasions right here, and we have all been studying simply how dependent Europe is on Russia for its provide of fossil fuels. Germany warned an embargo of Russian gasoline might trigger financial output to drop 5%, and but there are requires whole embargoes on Russian gasoline. I imply, is- is that this sensible? And the way a lot is the politics impacting this?
LAGARDE: You realize, I believe we’ve to be guided by the aim that we’ve. And the aim we’ve is to scale back and probably cancel the financing that’s offered to Russia to finance the battle, the unjustifiable, illegitimate battle of Russia towards Ukraine. So we’ve to regulate the insurance policies, whether or not it’s sanctions, whether or not it’s de-SWIFTing the banks, whether or not it’s slicing out the oligarchs from the property and their sources of financing, whether or not it’s lowering and ultimately slicing out provides from Russia in such a approach that we really attain the purpose we’ve, which is to scale back financing. If we had been to take abrupt measures that may induce a rise of the value of oil or gasoline all over the world from which the Russians would ultimately profit, then that may not be the appropriate coverage transfer. So we’ve to do it in a sufficiently sensible and refined approach in order that we really obtain the purpose that we’ve, which is to scale back the financing. And I believe that is what the Europeans collectively are taking a look at. The plan to utterly boycott coal has been adopted. There’s numerous work occurring regarding oil, regarding gasoline. And, you realize, there can be extra tales to inform a bit afterward.
MARGARET BRENNAN: You realize, on this nation, there’s numerous debate round how a lot the federal government is responsible versus the central bankers for the inflation that we’re experiencing. The US spent $6 trillion on COVID reduction, $2 trillion of it on President Biden’s watch final spring when the economic system was already recovering. Do you assume a few of this spending within the US exacerbated inflation as a result of Europe did not spend like this?
LAGARDE: We spent- we in Europe spent much less in stimulus. And I believe we spent otherwise. We spent just about half as a lot as what the US authorities spent on the stimulus and heating up the economic system. However we additionally spent it otherwise as a result of I believe the main target was predominantly on maintaining the roles, not essentially sending the checks. And because of that, individuals who managed to maintain their jobs alive, whereas not essentially, you realize, going to work as a result of COVID stopped everyone from going to work in some unspecified time in the future in time, they’d their job. So when COVID was over, they went again to their job. So I believe that the- the- the labor market that you’ve at the moment on this nation, within the US, which is extremely tense, the place you may have, you realize, numerous jobs that aren’t stuffed, the place you may have loads of vacancies, we do not have that in Europe in the meanwhile. And the present scenario you may have on the labor market right here within the US is clearly contributing to doable sturdy inflation and second spherical impact the place costs go up, wages go up, brief provide of labor, wages proceed to go up, and that feeds again into costs. That- that is one of many variations between our two economies.
MARGARET BRENNAN: You’ve got been in key positions all through a variety of financial crises. How harmful is that this second that we’re in proper now?
LAGARDE: It’s a tough second, but it surely’s one the place a really attention-grabbing phenomenon developed. If I look from my vantage level at Europe, the Russian aggression towards Ukraine has produced three key outcomes. It has resurrected NATO. That is Easter Day. So I am not- I am not, you realize, fantasizing right here, but it surely has resurrected NATO. It has united the Europeans greater than ever and it has strengthened a nation, Ukraine. The worth of that’s horrible. The loss of life, the destruction, the devastation. And we’re all involved and all need to assist.
MARGARET BRENNAN: OK.
LAGARDE: However that is fairly an attention-grabbing growth. And we’ve to be united and resolved to really deal with the scenario collectively as a result of—
MARGARET BRENNAN: I’ve to—
LAGARDE: —there must be solidarity.
MARGARET BRENNAN: I’ve to finish it there as a result of we’re out of time. We’ll be again.