The war in Ukraine is having "severe" repercussions for the eurozone economy, Christine Lagarde said Thursday, as soaring energy, disrupted supply chains and declining confidence cloud the outlook.

“The war in Ukraine is severely affecting the eurozone economy and has significantly increased uncertainty,” said the President of the European Central Bank, during a virtual press conference.

“The impact of the war on the economy will depend on the evolution of the conflict, the effect of current sanctions and possible additional measures,” she added.

These uncertainties explain the caution of the guardians of the euro zone which, unlike the other major central banks, have not started raising their key rates, nor even defined a precise timetable for increases in an attempt to stem the surge in price.

"The persistence of high energy costs, combined with the loss of confidence, could lower demand and curb consumption", thus weighing down growth in the euro zone, said Christine Lagarde.

Uncertainty about the outlook

La Française painted a not very encouraging picture of the economic situation: “the war is already weighing on the confidence of businesses and consumers, in particular through the uncertainty it entails.

Energy and commodity prices are up sharply.

Households face a higher cost of living” while “businesses face higher production costs and the war has created new bottlenecks” in supply chains.

At the end of the Board of Governors, the institute therefore contented itself with repeating its March signal in favor of price stability, announcing that the net purchases of assets, carried out within the framework of the APP, will take end of the "third trimester".

The first rate hike will occur “some time after” the end of these redemptions,

either "between a week and several months" later, said Christine Lagarde.

The ECB maintained its rates on Thursday at their historically low level.

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