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Lagarde Says Recession Is Not ECB Baseline for the Euro Area - BLOOMBERG

MAY 24, 2022

BY  Alexander Weber and Francine Lacqua


European Central Bank President Christine Lagarde rejected the idea that the euro area is heading for a recession.

“For the moment, we are not seeing a recession in the euro area,” Lagarde told Bloomberg Television on Tuesday from the World Economic Forum in Davos, Switzerland. “We don’t have that as a baseline.”

The ECB president cited unemployment “at rock bottom rates,” large household savings and the prospect for a strong summer for the tourism industry as forces that will offset negative shocks from the war in Ukraine and surging inflation.

The euro jumped on Lagarde’s comments, recovering earlier losses against the US dollar to hit a session high of 1.0724, and rallied versus other currencies including the Swiss franc and Sterling.

Lagarde spoke a day after laying out her vision for the central bank’s next steps in a blog post. It’s likely to exit negative interest rates by the end of the third quarter, with a first interest-rate increase set to happen in July, she said.

That prospective timetable for two quarter-point interest-rate hikes in the third quarter has irked some colleagues because it would effectively exclude moving in a 50 basis-point increment, according to people familiar with the matter.

“When you’re out of negative, you can be at zero, you can be slightly above zero,” Lagarde said. “This is something we will determine on the basis of our projections, on the basis of our forward guidance.”

Lagarde refused to be drawn on whether the central bank might consider a 50 basis-point move.

(Updates with further comments starting in third paragraph)

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