March 31, 2023

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The European Central Bank announced its monetary policy decisions today. The policy updates come after more than a month of war on the European continent and continued inflation after a pandemic-worn Europe. While ECB President Christine Lagarde pointed out historically low unemployment levels, the European economy continues to be challenged by high energy and food prices. 

“The war in Ukraine is severely affecting the Euro Area economy and has significantly increased uncertainty,” Lagarde said. “The impact of the war on the economy will depend on how the conflict evolves, on the effect of current sanctions and on possible further measures.”

The statement followed a meeting of the Governing Council of the ECB. They decided that the previous growth outlook has been threatened by the war in Ukraine. Factors such as higher energy costs, higher transportation costs and higher food costs all contribute to the rise of inflation and risk to economic growth. While the Euro Area is still feeling the effects of the pandemic, Lagarde attributes most of the stress on the euro to the ongoing military conflict in Ukraine. 

That isn’t to say that the bank only expects to see an economic decline, rather any growth will happen more slowly than previously expected. Decreased energy demands and a consistently low unemployment rate may help mitigate the impact of the war on the economy according to the bank’s report.

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