FRANKFURT, March 20 (Reuters) - Financial market turbulence will not stand in the way of the European Central Bank's fight against inflation as it has separate tools to fight both issues, ECB President Christine Lagarde said on Monday.
The ECB raised interest rates by 50 basis points on Thursday and said that inflation and financial stability considerations would both be key in any subsequent rate decisions.
Some critics said that the two may come into direct conflict, forcing the ECB to make a choice, an argument Lagarde firmly rejected in a hearing at the European Parliament's Committee on Economic and Monetary Affairs.
"There is no trade off between price stability on the one hand and financial stability on the other hand," Lagarde said. "For each of these two stabilities we are using different tools."
Financial stocks tumbled last week on fears of a new banking crisis but stocks rose on Monday after UBS Group's state-backed takeover of Credit Suisse appeared to close off one source of worry for the global banking sector.
The ECB earlier said that the inflation outlook alone would warrant more rate hikes but it made no commitment about any future moves, worried that market turmoil could fundamentally change the outlook.
For inflation, interest rates will remain the ECB's main tool while for the bank sector, the ECB can utilise its existing liquidity instruments or devise new ones.
But in any case, the bloc's lenders are resilient, Lagarde argued.
"We are very confident that the capital and liquidity positions of the euro area banks are very satisfactory, with significant capital ratio and liquidity coverage ratio way in excess of requirements," Lagarde said.
She added that in line with the bank's commitment last week, the ECB stood ready with its entire toolkit to support to the euro area financial system.
"If the tools that we have in the toolbox were not enough, I know that staff are capable of providing the adjustment or the recalibration that would be needed in order to address any liquidity risk that we would see developing."
