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The
U.S. Federal Reserve raised interest rates last week and
signalled a string of future moves, just days after the ECB said
it was in no hurry to raise its record-low deposit rate, even
while it continues to unwind exceptional stimulus.
"Our two economies are in a different place in the economic
cycle, even before the war in Ukraine," Lagarde told a financial
conference. "For geographical reasons, Europe is way more
exposed (to the war) than the U.S.."
Soaring energy costs have already pushed euro zone inflation to
a record-high 5.9% last month and the rate could hit 7% in the
months ahead, well above the ECB's 2% target.
With food prices also expected to jump, the inflation surge will
cut deep into households' purchasing power and the ECB has cut
its growth projections, with some policymakers arguing that an
even worse outcome is already more likely.
Lagarde said the U.S. economy is less reliant than Europe's on
commodity imports and its trade will also be less affected, so
that the two central banks will need to move out of sync.
"Our monetary policies won't be running on exactly the same
rhythm," she said.
As a consequence of the war, Europe will need to speed up the
greening of its economy to reduce its reliance on energy from
Russia, its biggest supplier of natural gas.
This transition will be inflationary in the short- to
medium-term, Lagarde warned, although the long-term impact of
the transition will be to weigh on prices.
"In the short, medium term, it will be of an inflationary
nature. Whereas in the long term, forces on prices will be
rather deflationary, she said.
(Reporting by Juliette Jabkhiro; Writing by Balazs Koranyi;
Editing by Alex Richardson and Catherine Evans)
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