European Central Bank President Christine Lagarde reiterated that borrowing costs will remain high as long as necessary to curb consumer prices – despite the suffering economy. “Our future decisions will ensure that the ECB’s key interest rates are set at sufficiently restrictive levels for as long as necessary,” Lagarde told lawmakers in the European Parliament. “We remain determined to ensure that inflation returns to our 2% medium-term target in due course,” she added on Monday in Brussels.
The European Central Bank raised its key interest rate to 4% this month – a level that most economists and investors believe will be the peak in a more than year-long campaign to curb inflation. Some members of the European Central Council supported this assessment, with Pablo Hernández de Cos, Governor of the Bank of Spain, stressing on Monday that the current level of interest rates could return the price growth rate to the 2% target if maintained for a long enough period.
Lagarde hints that the European Central Bank will continue raising interest rates despite the decline in inflation
Meanwhile, Bank of France Governor François Villeroy de Gallo said the ECB should not test the economy “until it collapses” – an indication that he would prefer not to raise interest rates further. But some officials are not sure that this target rate will be achieved. Bundesbank President Joachim Nagel said last week that it was too early to make such statements, as inflation is still very high and is expected to decline slowly.
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