ECB president highlights parallels between two eras but says modern central bankers have tools to manage structural change
President of the European Central Bank Christine Lagarde speaks at the 2024 Michel Camdessus Annual Central Banking Lecture at the International Monetary Fund has warned.
In a speech at the International Monetary Fund in Washington two days after the Federal Reserve cut interest rates by 50 basis points, pushing US equity markets to record highs, the ECB president argued that several parallels “between the “two twenties — the 1920s and 2020s — stand out”, pointing to “setbacks in global trade integration” and technological advances in both eras.
Today, central bankers’ tools for preserving price stability “have proved effective”, she said. Ms Lagarde pointed to the quick fall in inflation once central banks started to raise rates in 2022. Consumer prices had shot up following a surge in post-pandemic demand, global supply chain disruptions and big rises in energy prices after Russia’s full-scale invasion of Ukraine.Central bankers have been able to ease monetary policy in recent months as price pressures abated.
However, the ECB president warned against complacency, saying that issues including possible setbacks to globalisation, a partial disintegration of global supply chains, the market power of tech giants such as Google and the “rapid development of artificial intelligence” could all test central bankers.
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