The Strategist

ECB announces need for "sacrifices" to slow down inflation

08/30/2022 - 11:01

Europe needs to make significantly more "sacrifices" than in previous instances of monetary tightening in order to counteract growing inflation.
Officials of the European Central Bank (ECB) noted this during a gathering of central bank representatives from around the world in the American state of Wyoming, according to the Financial Times.

European central banks "will confront an even larger loss ratio than in the 1980s," according to ECB board member Isabel Schnabel, since "central banks will find it tougher to contain price pressures as a result of the globalization of inflation."

The loss ratio gauges the central bank's willingness to make concessions by slowing down economic growth and job creation in order to combat inflationary pressures.

Fran├žois Villeroy de Galhau, the president of the Bank of France, stated that "there should be no uncertainty" regarding the watchdog's readiness to raise rates over 2%, or above the so-called neutral level, which neither inhibits nor promotes economic growth. Villeroy expects that rates might reach this level before the end of 2022.