Christine Lagarde says US-China rift to push inflation higher

Geopolitical rifts caused by rivalry between the US and China could push up inflation by 5 per cent and threaten the leading positions of the dollar and euro, Christine Lagarde has warned.

The European Central Bank president said in a speech on Monday: “We may see more instability as global supply elasticity wanes; and second, we could see more multipolarity as geopolitical tensions continue to mount.”

Disruption to global supply chains would hit “critical sectors” such as the electric-car industry, she said, pointing out that the US is “completely dependent” on imports for 14 critical materials and Europe relies on China for 98 per cent of its rare earths supplies.