Lagarde Warns Rising Yields Will Slow Growth Amid Energy Price Pressures

ECB President Christine Lagarde spoke in Brussels on Monday about the impact of rising long-term interest rates on the economy. She stated that higher yields are tightening financial conditions and slowing growth, reducing the pass-through effect by more than projected. According to Lagarde, while growth has been resilient, the recent jump in long-dated yields will slow growth and reduce pass-through.

Lagarde emphasized that interest rates do not move in lockstep with energy prices, but the ECB's job is to stay ahead of potential knock-on effects. She noted that policymakers are not yet seeing evidence of second-round effects from higher energy costs, but are taking a measured approach to keep inflation in check.

The ECB President also addressed government aid programs aimed at offsetting energy costs, criticizing some for being temporary and targeted towards the most vulnerable populations. Lagarde stressed that such measures should be focused on those who need it most, not across-the-board solutions.