ECB to keep raising rates despite rising recession risks – Christine Lagarde

The President on the European Central Bank, Christine Lagarde, said in an interview, published today, that the ECB must continue raising interest rates, even in the situation of increased threats that the euro zone is sliding into recession.

Lagarde stressed that ECB’s mandate is price stability, and the central bank must deliver on that using all available tools, remaining determined to do what is necessary to bring inflation back to 2% target.

Lagarde pointed to central bank’s clear destination but said that there are not there yet.

The European central bank faces soaring inflation, which hit new record high at 10.7% in October and is expected to remain elevated through 2024, raising risk that households and businesses would start to lose trust in central bank’s willingness to bring inflation back to its target.

The ECB accelerated its policy tightening by raising interest rates by a total of 200 basis points in past three meetings, with growing expectations for pushing the borrowing cost towards 3% in 2023, signaling further rate increases in the near future.

Lagarde also warned of great risk that inflation could spread throughout the economy if it stays at such high levels.