Interest rates will continue to rise at a brisk pace, says Lagarde

The President of the European Central Bank Christine Lagarde on Monday reaffirmed the intention of the monetary institute to continue to raise its rates “at a sustained pace” to combat inflation still too high in the euro zone.

The ECB’s interest rates will still have to increase significantly at a sustained pace to reach levels that are sufficiently restrictive (i.e. penalizing for activity, editor’s note) and remain there for as long as necessary, the central banker said during a reception from the operator of the Frankfurt Stock Exchange.

In less than six months, the ECB raised its key rates by 2.50 percentage points, the fastest increase in its history.

We must reduce inflation and we will achieve this objective, insisted Ms. Lagarde.

For the time being, inflation in Europe is far too high, said Ms. Lagarde, as at the Davos forum last week.

This is partly because of our vulnerability to the evolution of the geopolitics of energy, she explained.

The decoupling with Russia last year since the start of the war of invasion in Ukraine has pushed energy inflation in the Eurozone to extraordinary levels, causing prices to rise more than 10% overall in October.

While energy inflation has recently come down, core inflation – excluding energy and food prices – continues to rise.

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Therefore, it is vital that inflation rates above the ECB’s 2% target do not take root in the economy, Ms Lagarde concluded.

Concretely, the guardians of the euro will raise interest rates in February and most likely in the following months.

In other words, we will stay the course to ensure the rapid return of inflation to our target of 2%, concluded Ms. Lagarde, while the decline in purchasing power linked to soaring prices has imposed itself as a major concern of Europeans.

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