President Christine Lagarde reiterated that the European Central Bank intends to raise borrowing costs by another half-point next month.
(Bloomberg) — President Christine Lagarde reiterated that the European Central Bank intends to raise borrowing costs by another half-point next month.
“In view of the underlying inflation pressures we intend to raise interest rates by another 50 basis points at our next meeting in March,” Lagarde told European Union lawmakers in Strasbourg.
“We will then evaluate the subsequent path of our monetary policy,” she said Wednesday evening.
Despite three months of moderating inflation, ECB officials are hammering home the message that the battle with soaring prices is not yet won. They’re worried about persistent underlying price pressures that could be further stoked as workers demand pay rises to compensate for diminishing purchasing power.
The US is facing a similar challenge, raising the prospect of more rate hikes than previously expected from the Federal Reserve.
Several ECB officials have stressed that next month’s planned half-point rate increase is unlikely to be the last in what’s already the most aggressive monetary-tightening cycle in the institution’s history.
Irish central bank chief Gabriel Makhlouf was the latest policymaker to back that tough stance, saying late Tuesday that he’s open to continuing to take “forceful action.”
Lagarde described price pressures as still strong with underlying inflation remaining elevated.
“Keeping interest rates at restrictive levels will over time reduce inflation by dampening demand and will also guard against the risk of a persistent upward shift in inflation expectations,” she said.
(Updates with more from Lagarde in last two paragraphs.)
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