• By The Financial District

ECB Chief Christine Legarde: Don't Worry About Stagflation

The European Central Bank (ECB) does not expect the war in Ukraine to push the eurozone into stagflation even if it does push up inflation due to higher energy prices and push down growth, President Christine Lagarde said on Saturday.

Photo Insert: ECB President Christine Lagarde

"Incoming data don’t point to a material risk of stagflation," Lagarde said in an interview with Phileleftheros published by the ECB on its website, Emma Thomasson reported for Reuters.

Lagarde said growth in the euro area could be as low as 2.3% in a severe scenario due to the war in 2022. However, she added, in all scenarios inflation is expected to decrease and settle at levels around the bank's 2% target in 2024.

Stagflation refers to an economy that experiences simultaneously an increase in the inflation rate and the stagnation of economic output as well as a high unemployment rate.

This phenomenon contradicted the formulation of John Maynard Keynes. It revived classical liberalism, also known as “neoliberalism,” which became the cornerstone of economic policy in the United States under President Ronald Reagan and in the United Kingdom under Prime Minister Margaret Thatcher.

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