The European Central Bank (ECB) President Christine Lagarde on Tuesday defended the central bank’s decision to raise interest rates in a forcible way and pledged to hike the rates further to tame the inflation.
“Moving faster at the start of the hiking cycle clearly conveys our commitment to bring down inflation to our medium-term target,” Lagarde said while addressing an event named “Karl-Otto-Poehl Lecture” here.
As inflation in the euro area is hovering at historically high levels, the ECB lifted main interest rates twice this year by a total of 125 basis points.
The ECB chief reiterated that the inflation in the euro area, which used to be low for a long period, is now “far too high.”
She warned that the euro area is in the tenth consecutive month of record-high inflation rates and would continue to be so in the near term.
Supply bottlenecks, coupled with pent-up demand for services have led to inflation broadening into both industrial goods and services.
Energy price spikes, which started when supplies were curtailed and aggravated by the Ukraine conflict, have been an overriding source of inflation in the euro area.
As the European Union is trying to lower its reliance on Russian energy and make a transition to green energy, Lagarde believes that it will affect supply and prices if energy prices are durably higher.
In view of the persistent high inflation in the euro area, the ECB needs to normalise monetary policy and “adjust rates by as much as necessary to reach our inflation target in the medium term,” Lagarde noted.
“We will not let this phase of high inflation feed into economic behaviour and create a lasting inflation problem,” she said.