Russia-Ukraine war to impact economic activity, energy prices: ECB head

By Ovunc Kutlu

ANKARA (AA) - The Russia-Ukraine war will have a material impact on economic activity and inflation through higher energy and commodity prices, the European Central Bank (ECB) President Christine Lagarde said Thursday.

The war will also lead to disruption of international commerce and weaker confidence, she told a news conference after the ECB kept interest rates unchanged, but signaled it will decrease its asset purchases faster than planned.

"The extent of these effects will depend on how the conflict evolves, on the impact of current," she noted.

Lagarde said the impact of the war needs to be assessed for the euro area economy, helped by ample policy support.

"We will ensure smooth liquidity conditions and implement the sanctions decided by the EU and the European governments," she added. "We will take whatever action is needed to fulfill the ECB's mandate to pursue price stability and to safeguard financial stability."

Lagarde also noted that the recovery of the European economy is boosted by the fading impact of the omicron coronavirus variant, while the supply bottlenecks have been showing signs of easing and the labor market has been improving.

She said the euro area economy is expected to grow 3.7% this year, followed by 2.8% next year and 1.6% in 2024.

The annual inflation forecast, however, was also revised up to 5.1% for this year, 2.1% in 2023, and 1.9% in 2024.