Ovunc Kutlu
April 14, 2022•Update: April 15, 2022
ANKARA
Surging energy and commodity prices are reducing demand and holding back production, European Central Bank (ECB) President Christine Lagarde said Thursday.
"Trade disruptions are leading to new shortages of materials and inputs," she said in a virtual news conference, after Lagarde tested positive for the coronavirus last Thursday.
The ECB head said Russia's war on Ukraine is affecting the economy in Europe and beyond, while the uncertainty it has caused is affecting businesses and consumers.
The outlook of the economy depends on how the war will evolve, impact of sanctions on Russia, and possible further measures, she added.
"Economic activity is still being supported by the reopening of the economy after the crisis face of the pandemic. Inflation has increased significantly, and will remain high over the coming months, mainly because of the sharp rise in energy costs," she explained.
Lagarde said the ECB judged during its meeting earlier Thursday that incoming data reinforced its expectation that its net asset purchases, under its Asset Purchase Programme, should be concluded in the third quarter of 2022.
The ECB announced earlier that it has kept its key interest rates unchanged, despite rising commodity prices and record high inflation.
"In the current conditions of high uncertainty, we will maintain optionality, gradualism and flexibility in the conduct of our monetary policy," Lagarde said.
"The euro area economy grew by 0.3% in the final quarter of 2021. It is estimated that growth remained weak during the first quarter of 2022, largely owing to pandemic related restrictions," she said.
Several factors, including the war, rising energy and commodity prices, higher cost of living for the public, and increasing production costs for businesses also point to slow growth for the remaining of this year, according to Lagarde.
"The war has created new bottlenecks, while a new set of pandemic measures in Asia is contributing to supply chain difficulties," she added.
