Euro zone govts must limit subsidies on food, fuel – Lagarde says

Budget support used to shied euro zone citizens from high food and energy costs must be limited and temporary to ease the pressure on inflation, European Central Bank President Christine Lagarde said on Monday.

Some euro zone governments are using fiscal measures to help vulnerable households but this risked increasing already high budget deficits, adding to inflationary pressures rather than deducting from them.

“It is essential that fiscal support used to shield those households from the impact of higher prices is temporary and targeted,” Lagarde told a parliamentary hearing in Brussels. “This limits the risk of fuelling inflationary pressures, thereby also facilitating the task of monetary policy.”

Lagarde also repeated the ECB‘s most recent message that interest rates will need to rise over the next several policy meetings even as growth slows substantially.
Source: Reuters