The Federal Reserve of the United States, surprised by galloping inflation last May, decided to raise its key rate by 0.75 points, the largest increase since 1994. The European Central Bank (ECB) decided to do the same and to raise its key rates from July, an unprecedented decision in eleven years. However, monetary policy has no price on inflation, according to Jean-Hervé Lorenzi, founder of the Circle of economists, guest of Europe Matin Friday.
Inflation reached 8.1% in the euro zone
“I clearly separate Jerome Powell’s position from that of Christine Lagarde. It is not a monetary phenomenon. The rise in prices is linked to scarcity and difficulties in the commodity markets on which Jerome Powell, president of the Federal Reserve of the United States, has no hold”, he specifies at the microphone of Europe 1.
“His solution is to step back,” says Jean-Hervé Lorenzi. “I’m exaggerating a bit, but you really have to manage to limit economic activity so that demand drops and therefore prices calm down,” he says. In other words, Jerome Powell plans to create unemployment to curb consumption, a decision deemed dangerous by the founder of the Circle of Economists.
Conversely, the policy of the European Central Bank is “more subtle”. “It’s a speech that everyone likes, the ‘I’m showing my muscles a little’, but it has a major problem, the euro zone is made up of countries with different economic situations, we can’t have too many differences. strong,” he said. “The ECB is going to be very careful not to blow up the euro zone. Remember the drama in Malta, Greece, imagine if Italy or Spain have difficulties.”
After the 2010 crisis, central banks chose to implement policies to support the economy to revive growth. Policies that notably involved the purchase of state or corporate debt but also 0% rates.