Lagarde's cautious approach to interest rates amid global banking upheaval

(MENAFN) European Central Bank President, Christine Lagarde, has stated that future interest rate decisions are now open, following the recent upheaval in the global banking system. Lagarde highlighted that the economic outlook is now "blurrier" than it was just a few weeks ago, and that any decision to hike rates would depend on incoming data, particularly if there were any signs of inflation heading convincingly downwards.

Speaking at a conference at Frankfurt's Goethe University on Wednesday, Lagarde emphasised the importance of the rate path being data dependent, stating that "we are neither committed to raise further nor are we finished with hiking rates." Lagarde also acknowledged that recent financial market tensions have added new downside risks and have made the risk assessment blurrier.

This open-ended approach is a shift from the ECB's previous stance of clearly indicating that more rate hikes were in the pipeline, as it underlined its determination to reduce inflation. However, the recent failure of Silicon Valley Bank in the U.S. has sent shudders through financial markets due to concerns that other banks may suffer losses, as central banks across the U.S., Britain and Europe rapidly increase interest rates to combat inflation.

As a result, Lagarde's comments reflect the central bank's cautious approach to interest rates, highlighting the importance of monitoring data closely in order to make informed decisions in an increasingly uncertain economic landscape.



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