The ECB will fight inflation with higher interest rates even at the cost of the threat of recession

Inflation in the Eurozone rose to a record 10.7 percent in October, and is therefore well below the ECB’s two percent target. The bank is trying to stop the rise in consumer prices by raising interest rates.

“Our mandate is price stability and we must fulfill it using all the tools at our disposal,” said Lagarde. He practically repeated his message from last week. “We are determined to do whatever it takes to bring inflation back to our 2% target,” she said.

In the last three meetings of the monetary committee, the ECB has raised the base interest rate by a total of two percentage points. Markets are counting on another hike, which is expected to raise the main interest rate to 3% in 2023 from the current 1.5%.

“The goal is clear and we are not there yet,” said Lagarde. However, you did not specify at what level the interest rate hike might end. “In the future, we expect further interest rate hikes,” she admitted.

At the same time, experts predict that inflation in the euro area will remain above two percent until 2024. This increases the risk that businesses and households will start to change their behavior as they lose faith in the ECB’s efforts to curb inflation, wrote Reuters.

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