European Central Bank celebrates its 25th anniversary in the battle against inflation

In the middle of the battle against inflationhe European Central Bank (ECB) This Wednesday celebrates its first quarter of a century of an existence marked by the crises that forced it to extend its field of action.

Some 200 guests are expected tonight in the steel and glass tower of the monetary institution located on the banks of the Main river in Frankfurt.

The evening’s program includes music by Debussy and a birthday cake cut by ECB President Christine Lagarde and two of her predecessors, Jean-Claude Trichet and Mario Draghi.

The party takes place, however, when inflation in the euro zone is sailing at a record level, taking into account that the institute created on June 1, 1998 has the main mission of controlling it as much as possible at a level close to 2%.

Inflation reached 7% in April, driven by the prices of energy and imported goods.

“We will guarantee the return of inflation towards our objective”Lagarde assured on Wednesday in the European press.

Annual inflation averaged 2.05% in the last quarter of a century, during which nine countries joined the Eurozone, thus reaching 20 members.

In addition, the ECB now assumes the supervision of the large European banks and the euro is the second currency in the world after the dollar.

existential crises

After this good rating, the institution has also experienced difficult times.

It had to weather several storms, such as the threat of seeing the euro implode in the 2010s, when the public debt crisis hit.

A long phase of stable inflation was followed by a sharp acceleration in price rises after more than a year, due to the war in Ukraine.

Thinking it would be a temporary phenomenon, the ECB waited at first, before raising key rates to an unprecedented level of 3.75 percentage points since July, risking hurting already weak growth.

The rates will be “taken to sufficiently restrictive levels”, what will be kept “as long as it takes” for inflation to return “as fast as possible” to the 2% target, Lagarde added.

The difficulties experienced by the euro zone meant that the monetary arsenal of the ECB It was extended beyond the classic weapon of rates: public and private debt purchase programs, which flirted with the prohibition that it has to finance the States and waves of giant loans to banks.

The institute also made dire mistakes. In 2011, Jean-Claude Trichet raised rates when a crisis was brewing. his successor Mario Draghi corrected the trend since his arrival, earning the nickname of “Super Mario”savior of the euro zone.

But the solitary management of the Italian ended up creating discord in the council of governors, where the heads of the national central banks meet who have divergent ideas.

digital euro

Christine Lagarde contributed to silencing dissenting voices.

“In an unstable world, the ECB has ensured and will continue to provide a reliable anchor of stability”wrote the former head of the IMF.

“In every crisis that the ECB went through, it knew how to innovate and adapt, and that is what must be remembered before highlighting errors or internal tensions”says Frederik DucrozetChief Economist at Pictet Wealth Management.

He ECB currently employs 4,200 people, or ten times more than in 1999, and its mandate continues to evolve, wanting to give a touch of “green” to monetary policy in the face of the imperative to combat climate change.

Regarding the euro, used by nearly 350 million Europeans in 20 countries, “it will survive many more years in the future”says Lagarde.

It will also be transformed: the digital euro, as a new means of payment in response to the rise of cryptocurrencies, could be launched in three or four years”, he stated on Wednesday Fabio Panettamember of the board of ECBin an interview with the newspaper Les Echos.

Source: AFP