Christine Lagarde said the rate hike cycle should ensure inflation returns to the 2 percent target over the medium term.
After the ECB’s second rate hike of 75 basis points last week, Lagarde said borrowing costs should increase even more. “Our direction is clear, and we have not reached that point yet,” the ECB President said in an interview for a Lithuanian website.
Stating that the risk of recession has also increased, Lagarde also warned of the dangers of not taking steps to rein in inflation. The President said that stable prices are the basis of a well-functioning economy and that it is in the interest of all. Lagarde noted that inflation is still very high, “If it stays at these levels, the risk of spreading to the whole economy increases. Then companies and consumers will expect high inflation in the future, which is dangerous.”
Lagarde stated that Eurozone banks are in a much stronger position than in the 2008 crisis.
In October, inflation in the 19-member Eurozone rose to 10.7 percent, breaking new records.