2023-09-25 17:03:03
The president of the European Central Bank, Christine Lagarde, reiterated on Monday that interest rates will remain high as long as it takes for inflation to return to the 2% target, even if the economy is going through a difficult period, reports the agency Bloombergquoted by Agerpres.
President of the European Central Bank (ECB), Christine LagardePhoto: Daniel Roland / AFP / Profimedia Images
“Our future decisions will ensure that the ECB’s benchmark interest rates will be set at sufficiently restrictive levels for as long as necessary,” Christine Lagarde told members of the European Parliament’s economic and monetary affairs committee.
“We remain determined to ensure that inflation returns in an orderly manner to our medium-term target of 2%,” Lagarde added, essentially repeating the statement published by the ECB at the end of this month’s monetary policy meeting, when the euro’s guardians decided on the 10th consecutive increase in the cost of credit, up to an all-time high of 4%.
Most economists and investors believe that the 4% level will be the peak of the interest rate hike cycle started by the ECB a year ago to counter inflation.
Some members of the ECB’s board of governors have expressed support for this view, such as Bank of Spain Governor Pablo Hernandez de Cos, who reiterated on Monday that the current level of interest rates should bring inflation back to the 2% target if will be maintained for a sufficiently long period.
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In contrast, Bank of France governor Francois Villeroy de Galhau said the ECB should not test the economy “until it breaks”, a hint that he would prefer no more interest rate hikes.
Christine Lagarde also recognized the problems caused by the ECB’s actions, especially for those 30% of households that have mortgage loans with variable interest.
“Our task is to return inflation to the target in an orderly manner. The faster we get there, the more stable the prices will be, and the less painful it will be in the future both for those who invest and for those who borrowed”, appreciated the president of the ECB.
Recently, the European Central Bank (ECB) lowered its growth forecasts for the euro area over the next two years, but raised its inflation forecasts, which hints at possible stagflation, a period in which an economy suffers a double whammy from high inflation and modest growth.
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