Has Christine Lagarde really lost the war against inflation?

Has Christine Lagarde really lost the war against inflation?

The problem with the war is that we know when it begins – 24 February for the invasion of Ukraine – but we never know when and how it will end. Nobody knows when Putin will have achieved the goals of his now famous “special military operation” in Ukraine. Moreover, either Russia or Ukraine will win this war. Thus, it is impossible to predict when the double effect of sanctions, in particular the embargo on Russian oil (maybe soon on gas), will stop raising energy prices. according to Robert Jules, Forecast over $150 per barrel Emerging, catastrophic scenario for Western economies.

As for inflation, it’s a bit the same. No matter how hard we try to predict the peak, it is very likely that it will be postponed in time as unexpected elements lengthen the horizon. Thus, after being described as “temporary” and then as a “significant risk” to the economy, central banks may lose control of inflation, due to a lack of knowledge or ability to act with sufficient force and in time. To strike too fast and too hard is to risk plunging the economy into recession; But doing it too late, or too slowly, can result in a loss of control in an endless wage-price spiral. This is the dilemma we will lock ourselves in.

In the absence of the ability to freeze prices, the anti-inflation weapon par excellence is monetary tightening. The US Federal Reserve, which already raised its key interest rate by 0.25 point in March and then by 0.50 point in May, is planning two increases of 0.50 point in June and July. in spite of that, Price hikes accelerated in May in the US, And nothing says Fed action will suffice, even if fears of a US recession begin to emerge.

In Europe, Christine Lagarde, the French president of the European Central Bank, has finally decided to do so Giving an easy and almost free credit termination schedule. In addition to halting the asset buyback policy, the famous “quantitative easing” was implemented during the 2008 financial crisis and amplified during the sovereign debt crisis, inflating its balance sheet from 1,200 to nearly 9000 billion euros, The European Monetary Agency has toughened its rhetoric and programmed a series of rate hikes : 0.25 points in July, for the first time in eleven years, and another tightening in September which may double depending on the level of inflation, and then, most likely, a regular rise in prices until the end of the first quarter of 2023 when, according to its forecast, it will be reached to the famous peak of inflation.

Will this be enough or is the ECB already behind, knowing that Europe is more vulnerable to inflation through higher energy prices due to its high dependence, especially in Germany, on Russian hydrocarbons? Colin Vasquez assesses six key questions.

What is certain, however, is that this turning point in monetary policies is a game-changer for the global economy and financial markets. For the French economy, higher prices nevertheless serve as a guarantee against budget deviations, except for the somewhat implicit “Frexite” regulation, which Jean-Luc Mélenchon does not exclude, ready for a confrontation with Europe to impose a 250 billion euro recovery plan. But the victory of the United Left coalition around the Nubians in the legislature is unlikely. A rate hike by the European Central Bank would reduce Emmanuel Macron’s room to maneuver to shore up purchasing power and risk damaging the promise of a return to full employment, A promise seems more and more like a mirageshaded Fanny Ginochet.

Will the summer be fatal in the markets? wonders Eric Benhamo. For financial markets, a rate hike from the European Central Bank is a blow as well With a sharp decline in European stock markets, the CAC 40 index and above all fear of a bond collapse Which in turn may affect the savings invested in life insurance. Faced with the risk of rapidly rising interest rates, savers may be tempted to arbitrate in favor of the Livret A savings account, whose bonus could be raised to about 2% in August. Experts have already begun to ask the government Precautionary measures to avoid freezing of funds in euros As provided by Sabine Law 2.

Perhaps the worst comes with the risks of blackouts, even gas this winter. Contrary to what Emmanuel Macron asserts, who says that this will not happen, Many energy experts anticipate potential cuts organization with manufacturers, and even with individuals, which has not happened since the beginning of the 1950s, writes Juliette Raynal.

As the OECD and the International Monetary Fund darken their forecasts for the global economy, OFCE economists slipped to 2.4% versus 2.7% growth It is expected in France this year, he explains Gregoire Norman. A sharp drop in consumption in the first quarter, weaker-than-expected economic growth in 2021 (6.8% instead of 7%), and high inflation have left economists even bleaker in their forecasts.

It will be difficult to negotiate the role and it is time for France to break out of its endless electoral chain to get to work. According to a senior German industrialist, we are already in Germany planning a “what if” resilience plan in case the war in Ukraine escalates and leads to a new tightening of sanctions by cutting off gas. A secret plan, but it stipulates which factories will be closed, with partial unemployment, or retained as a priority.

This bleak prospect comes at a time when a new shock will hit the automotive sector The switch has been voted in the European Parliament to 100% electricity in 2035. according to Nabil BourassiHowever, automakers largely anticipated this deadline and You intend to switch to the battery era long before that deadline. They just worry that consumers won’t be there…

The week was also marked by Refusal to reform the European carbon market Which plans to create a compensation mechanism at the border because of the Green Party’s desire to tighten an already controversial system that risks weighing, at the worst of times, on the competitiveness of European companies. Between growth and climate, we will soon have to choose.

as you find Replay of the ninth session of the Paris Air Forum, organized by exhibition At the Maison de la Mutualité on June 7.

And our articles with An exclusive interview with Thierry Breton, European Commissioner for the Internal Market, Accordingly, if we add our planned investments in defense, Europe will be ahead of China. Guillaume Faury, Airbus CEO and President of Jivas, also gives an update at the Paris Aviation Forum on the prospects for the aerospace and defense industry during the war in Ukraine. Can the air become greener without decreasing? How do you get out of kerosene? Patrick Boyani, President of TotalEnergies, discussed with Augustin de Romanet, President of ADP, On the development of sustainable aviation fuel (SAFs).