Lagarde asserts ECB commitment to safeguarding Eurozone stability


The European Central Bank (ECB) has pledged to maintain stability in the Eurozone and will respond when necessary, according to its President, Christine Lagarde. The European banking sector is currently under stress, but Lagarde said that the real extent of the tensions is yet to be seen. She added that there will likely be “tighter” loan conditions. The ECB is closely watching market developments and will respond if necessary to preserve price and financial stability in the Eurozone. Lagarde also said that the Eurozone banking sector is resilient with strong capital and liquidity positions. European bank shares have been falling following the failure of two mid-sized US banks and the collapse of Credit Suisse shares. Swiss authorities have intervened to restore order and ensure financial stability by pushing UBS to acquire Credit Suisse. Lagarde has reassured policy makers that the Eurozone banking sector is solid and well capitalised. She warned that in case of financial tensions, there will likely be a tightening of lending and borrowing conditions. Interest rates are the main tool to return inflation to the annual target of 2%, according to Lagarde, while the latest data points to 8.5% inflation in February. The ECB raised rates by 50 basis points in early March despite the collapse of US banks and ensuing turmoil. The ECB deposit rate now stands at 3%, the highest level since 2008.

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