More interest rate increases are on the way, according to Lagarde of the European Central Bank.
The head of the regulator says that inflation is too high in the euro area and could spread to the rest of the economy.
In an interview with Delfi published on Tuesday, ECB President Christine Lagarde said that even though the risk of recession has grown, the ECB will keep raising interest rates to slow inflation in the Eurozone.
Since July, the ECB has raised interest rates by a total of 200 basis points, which is the “fastest increase in the history of the euro.” This has brought rates in the Eurozone to 1.5%, which is the highest level since 2009. This was done to try to stop inflation from going up too fast. The bank tries to get inflation back to the target level of 2% by “using all the tools we have.”
“We know where we’re going, but we’re not there yet.” “We will have more rate hikes in the future,” Lagarde said, but she did not say what the target rate would be.
In response to a note that said the ECB has been slow to respond to inflation, she said that the Central Bank started “normalising” its monetary policy almost a year ago and “we are not done yet.” She also said that the government agency “will decide on future policy steps at each meeting” to see how the economy and inflation look in the future.
Lagarde agreed that there was a greater chance of a recession, but she warned that “the longer inflation stays at such high levels, the more likely it is that it will spread throughout the economy.”
In October, inflation in the 19 countries that use the euro hit a record high of 10.7%, sharply higher than the previous month’s 9.9%. This is expected to stay well above the ECB’s 2% target until 2024.