(Original title: Lagarde hawks again: The next meeting will raise interest rates sharply and stick to the 2% inflation target)
Zhitong Finance APP learned that European Central Bank President Christine Lagarde said that the European Central Bank will take all necessary measures to restore inflation to the target level, and pointed out that it will further raise interest rates “substantially” at the upcoming meeting. Lagarde said on Monday that borrowing costs would have to rise steadily to reach sufficiently restrictive levels and remain there for as long as needed. Lagarde said: “We will stay the course and ensure that inflation returns to our target level in time. It is crucial that inflation above the ECB’s 2% target does not become entrenched in the economy.”
The comments sparked a heated debate over whether it would be appropriate to slow the pace of rate hikes as inflation retreats from record highs. Lagarde said last week that staying on course was her “policy mantra” as officials increasingly shifted their focus from headline inflation to record core inflation. “While energy inflation has declined recently, underlying inflation continues to rise,” Lagarde said on Monday.
Hawks such as Dutch central bank governor Klaas Knot want at least two more rate hikes of more than 50 basis points starting next week before the end of the current cycle. However, some caution against going too far. Greek Central Bank Governor Yannis Stournaras on Monday advocated a more gradual approach amid slowing growth in the euro zone.
Last week, Lagarde said in a speech that inflation levels in Europe remained high and they would not relax their determination to control inflation. Lagarde pointed out: “Inflation levels are still too high, and we should keep high interest rates. Interest rates need to remain at “restrictive levels” for an extended period of time to get inflation back down to 2% quickly.”