Brussels: European Central Bank President Christine Lagarde said interest-rate increases may need to persist beyond a planned half-point move in two weeks’ time.
“At this point in time, it’s possible that we continue on that path,” Lagarde told Spanish television show Espejo Publico on Thursday. “By which amount in each and every meeting is impossible to say at this point.”
She described March’s hike as both necessary and very likely, saying policymakers will do everything to return inflation to the 2 per cent target from more than four times that now.
The ECB chief is set to preside over a second straight rate increase of 50 basis points as officials maintain their inflation-fighting efforts following stronger-than-anticipated European data this week. Investors now see the deposit rate being lifted to a peak of 4 per cent, up from its current level of 2.5 per cent.
Asked about the so-called terminal rate, Lagarde said: “The real honest answer is that it will determined by data.” Borrowing costs will have to remain at levels that restrict economic activity and can’t be cut until inflation is guaranteed at the target, she said.
“What’s very certain is that we’ll do whatever’s needed in order to bring inflation back to 2 per cent,” Lagarde said.
She described the retreat in price growth as not “stable.”
“Inflation has gone down in the last three months, it has gone up a little bit in February,” Lagarde said without specifying which region she was referring to. Euro-zone inflation data for last month are due Thursday at 11 am
The euro-area economy will perform better than initially expected, according to the ECB chief, who ruled out a recession this year.
