Christine Lagarde Reaffirms Commitment to High Interest Rates to Tackle Consumer Prices

ECB President Christine Lagarde reaffirmed, before the European Parliament, that interest rates will remain high as long as necessary to calm consumer prices.

The Frankfurt institution has raised its interest rates ten times since July 2022, including during its back-to-school meeting around ten days ago.

« Do we also have in our minds what pain this inflicts, what suffering there is? Yes, it’s in our thoughts“, observed Ms. Lagarde.

30% of households use variable rate loans

The central banker cited as an example the fact that 30% of households in the euro zone have outstanding mortgage loans at variable interest rates.

The increase in the ECB’s key rates mechanically increases their monthly repayments, ” and it’s hard“continued the President of the ECB.

Record rate rise in last 14 months

Likewise, fuel prices and those of energy in general “ weigh heavily on low-income households,”she added.

Also, ” our duty is to bring inflation back to its target in a timely manner“, she insisted.

« The sooner prices are stable, the less painful it will be both for those who invest, but also for those who have borrowed“, she concluded.

The ECB raised its benchmark interest rate in mid-September to its highest level since 1999, defying those who called for a truce so as not to worsen the slowdown in economic activity in the euro zone.

The cumulative rise in rates over the last fourteen months has now reached 4.50 percentage points, an unprecedented shock for the euro zone.

If inflation continues to decline in September, as expected, the ECB will have less reason to continue the rate hike cycle.

The governor of the Banque de France (BdF) for his part wished on Monday a maintaining ECB rates at their current level for an extended period, preferable according to him to further increases which would endanger the economy.