by Francesco Canepa and Balazs Koranyi

FRANKFURT (Reuters) – The current turmoil in financial markets may make it easier for the European Central Bank (ECB) to dampen demand and inflation, ECB President Christine Lagarde said on Monday.

While investors are worried about the consequences of a banking crisis, Christine Lagarde reaffirmed that this does not have the effect of hindering the ECB’s fight against inflation but could on the contrary facilitate it.

“It’s clear that financial stability strains could impact demand and could actually do some of the work that would otherwise be done by monetary policy and interest rate hikes,” she said. said during a hearing before the Committee on Economic and Monetary Affairs of the European Parliament.

The ECB raised its deposit rate by 50 basis points on Thursday to bring it to 3.0% and Christine Lagarde reiterated on Monday that the outlook for inflation alone justified further rate hikes.

However, it made no commitment in the face of the uncertainties raised by the turmoil in the banking sector.

Christine Lagarde assured that the banks of the euro zone were resistant and that their exposure to Credit Suisse – bought out urgently by UBS on Sunday – amounted to millions and not billions.

She warned, however, that European banks should prepare for slower economic growth, higher funding costs and lower lending volumes.

“Individual financial institutions should carefully preserve their current levels of resilience, to ensure that they can cope with a potentially less favorable environment,” she said.

(Diana Mandiá and Blandine Hénault for the , edited by Tangi Salaün)

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