The following is the transcript of an interview with Christine Lagarde, President of the European Central Bank, broadcast on Sunday April 24, 2022 on “Face the Nation”.

MARGARET BRENNAN: We are now joined by Christine Lagarde, President of the European Central Bank, who sets monetary policy, including interest rates for the 19 countries that use the euro as their currency. Madame Lagarde, welcome to the program.


MARGARET BRENNAN: Hello. Good to see you back here in Washington. We often talk about inflation in this country, but inflation is also at an all-time high in Europe. The chairman of the Federal Reserve has talked about raising interest rates in this country next month by up to half a percent to try to gain control here. Why do you think you can wait until summer?

LAGARDE: I believe that we share the same desire, which is to control inflation, which is to use all the tools at our disposal to do so. But we are faced with a different beast. When I look at my core inflation, which is the inflation that excludes the most volatile items such as energy and food, my core inflation is 2.9%. Inflation in Europe is currently very high. Fifty percent of that is related to energy prices. Before the war in Ukraine it was already climbing, but the war in Ukraine significantly increased these prices. It is therefore necessary to use the tools and the sequence, which is appropriate according to the sources of inflation. If I raise interest rates today, it won’t lower the price of energy. So we embarked on this adventure of phasing out accommodative monetary policy. We will therefore halt asset purchases during the third quarter. High probability that we will do so at the beginning of the third quarter. And then we’ll look at interest rates and how and how much we raise them. But we have to depend on the data because of the sources of inflation that we currently have.

MARGARET BRENNAN: You said the energy, the high energy and the lack of confidence could be lingering here. Does this indicate that we have strong fears that we will tip into a recession? And can you raise rates without that risk?

LAGARDE: That’s the trade-off that central bank governors are facing right now. We have to be guided by our mandate, by our objective which is to restore price stability, which we have all defined at around 2%. So that’s… that’s the mandate. But at the same time, we have to do it in a sufficiently sequenced, well-calibrated way, for us in Europe, in a gradual way so as not to induce a recession. We are currently facing, you know, winds that reduce growth and increase inflation. So we have to navigate between the two, guided by the mandate of price stability and lower inflation.

MARGARET BRENNAN: You’ve referenced the war with Russia a few times here, and we’ve all learned how much Europe depends on Russia for its fossil fuel supply. Germany has warned that a Russian gas embargo could lead to a 5% drop in economic output, yet there are calls for full Russian gasoline embargoes. I mean, is it practical? And to what extent does politics have an impact on this?

LAGARDE: You know, I think we have to be guided by the goal we have. And the goal that we have is to reduce and eventually cancel the funding that is being provided to Russia to finance the war, Russia’s unjustifiable and illegitimate war against Ukraine. So we need to adjust policies, whether it’s sanctions, whether it’s de-SWIFT of banks, whether it’s removing oligarchs from assets and their sources of funding, whether ‘It’s about reducing and ultimately eliminating supplies from Russia in such a way that we actually achieve the goal that we have set ourselves, which is to reduce funding. If we were to take sudden action that would induce an increase in the price of oil or gas in the world from which the Russians would end up benefiting, then it would not be the right political decision. So we have to do it in a smart enough and subtle enough way that we actually achieve the goal that we have set ourselves, which is to reduce funding. And I think that’s what Europeans are looking at together. The comprehensive coal boycott plan was adopted. There is a lot of work going on regarding oil, regarding gas. And, you know, there will be more stories to tell a little later.

MARGARET BRENNAN: You know, in this country there’s a lot of debate about how much of a responsibility government versus central bankers have for the inflation that we’re experiencing. The United States has spent $6 trillion on COVID relief, including $2 trillion under President Biden’s watch last spring when the economy was already recovering. Do you think some of that spending in the US has exacerbated inflation because Europe hasn’t spent like that?

LAGARDE: We spent – ​​we in Europe spent less on recovery. And I think we spent differently. We’ve spent about half of what the US government has spent on reviving and warming the economy. But we also spent it differently because I think the focus was mostly on keeping the jobs, not necessarily sending the checks. And as a result of that, people who managed to keep their jobs, without necessarily, you know, going to work because COVID prevented everyone from going to work at some point, they had their jobs. So when COVID was over, they went back to their jobs. So I think the–the–the job market that you have right now in this country, in the United States, which is incredibly tight, where you have, you know, a lot of jobs that aren’t being filled, where you have lots of vacancies, we don’t have that in Europe at the moment. And the current situation you have in the labor market here in the United States clearly contributes to possible high inflation and a second-round effect where prices go up, wages go up, labor shortages, Wages continue to rise, and this affects prices. This is one of the differences between our two economies.

MARGARET BRENNAN: You have held key positions throughout several economic crises. How dangerous is this moment we find ourselves in?

LAGARDE: It’s a difficult moment, but it’s when a very interesting phenomenon has developed. Looking at Europe from my perspective, Russian aggression against Ukraine produced three key results. He resurrected NATO. It is Easter day. So I’m not – I’m not, you know, fantasizing here, but this resurrected NATO. It united Europeans more than ever and strengthened a nation, Ukraine. The price is terrible. Death, destruction, devastation. And we are all concerned and all want to help.


LAGARDE: But it’s quite an interesting development. And we must be united and determined to face the situation together because…


LAGARDE: … there has to be solidarity.

MARGARET BRENNAN: I have to stop here because we’re out of time. We will return.