Christine Lagarde has rejected calls for the ECB to tighten monetary policy faster than planned to tackle record inflation, saying it “has every reason not to act as quickly or relentlessly as the Fed” .

Soaring energy and food prices pushed euro zone inflation to a record 5 percent in December, well above the ECB’s 2 percent target. However, the ECB president predicted that inflation in the euro zone will stabilize and “fall off gradually” this year.

The Federal Reserve and Bank of England are expected to raise interest rates several times after halting asset purchases this year. But the ECB said in December that it was “unlikely” to raise interest rates this year and outlined plans to continue buying bonds through most of 2022.

“The U.S. economic recovery cycle is ahead of Europe’s,” the ECB president told France Internationale on Thursday. “Therefore, we have every reason to not act as quickly and relentlessly as people think the Fed is.”

While Lagarde believes inflationary pressures will soon subside, investors are betting prices will continue to beat the ECB’s forecasts and force it to change its policy stance more aggressively than planned this year.

While the ECB insists that higher borrowing costs in 2022 are out of line with its guidance, markets now expect the ECB to raise interest rates twice by 0.1 percentage point by the end of the year.

After Germany’s 10-year bond yield, which serves as a benchmark for eurozone borrowing costs positive On Wednesday, Lagarde said for the first time since 2019 that rising yields meant “economic fundamentals are recovering.”

Critics argue that the ECB has been too slow to unwind its monetary stimulus for fear it will push up borrowing costs for governments that have borrowed heavily during the coronavirus pandemic.

Three German economists – Jürgen Stark, Thomas Mayer and Gunther Schnabl – wrote in an article Project Syndicate Articles This week: “It is increasingly clear that without a monetary policy response, inflation will gain momentum”. But they added: “Such austerity could create serious problems for heavily indebted euro zone members.”