Lagarde says France must fix its own debt problems, sees no second-round effects yet
ECB President Christine Lagarde played down hopes of bond purchases to help Paris. Inflation is driven mainly by energy, she said, but the ECB sees no spillover into wages yet.
Archive image · Photo: European Parliament from EU / Wikimedia Commons, CC BY 2.0 (cropped and resized)
European Central Bank President Christine Lagarde on Wednesday played down speculation that the ECB would step in to support French government bonds. Speaking at a CNN event in Bangkok on the sidelines of the IMF and World Bank annual meetings, she said particular circumstances left some countries more affected, “France being a case in point,” and that the primary solution “lies at home in France,” through fiscal consolidation. French bonds have been among the hardest hit in a global bond selloff.
Analysts have speculated for weeks that the ECB could use its Transmission Protection Instrument, which can be activated against market moves it considers “unwarranted” and “disorderly.” Investors worry that political maneuvering ahead of next year’s presidential election could hinder efforts to cut France’s large deficit. Lagarde also said she would not run for president of France, FXStreet reported.
Euro zone inflation has been driven “predominantly, but not exclusively” by energy price increases linked to the Iran war, Lagarde said. The ECB sees no second-round effects on other prices yet but is watching signals such as union wage demands. “We cannot wait until they’re there in full view, but we can anticipate,” she said. The ECB has raised rates twice in the past four months and is expected to do so again in December, Business Recorder reported. She called the IMF’s 1.1% growth forecast “not a bad outcome.”