ECB Insight: Lagarde Promises ‘Further Rate Increases’ to Be Determined Meeting by Meeting

1 November 2022

By David Barwick – FRANKFURT (Econostream) – European Central Bank President Christine Lagarde on Tuesday repeated with no obviously significant deviation the main messages of last Thursday’s post-Council meeting press conference, promising despite risen recessionary risks further rate hikes based on a meeting-by-meeting approach.

The interview Lagarde gave to Latvian news portal Delfi fits a well-established pattern of ECB communications: When Lagarde – or another Executive Board member - is headed to one of the Eurozone member countries less often visited by top-tier representatives of the Eurotower, at least one of the country’s media can expect an opportunity to ask some questions.

These are not generally seen by the ECB as occasions to break news, so Lagarde’s Delfi interview – like that with Slovenian daily Delo in May or with Cypriot daily Phileleftheros in March – brought no surprises.

Inflation remains ‘far too high’, driven primarily by energy and food, with energy price pressures ‘feeding through to more and more sectors in the economy’, she said. Monetary authorities ‘expect to raise interest rates further to make sure that inflation returns to our medium-term target of 2% in a timely manner.’

The meeting-by-meeting approach to further moves will include an assessment of ‘how the outlook for the economy and inflation has evolved, also considering how the measures we have taken so far are working’, she said.

More persistently elevated inflation entails more risk of becoming entrenched, which ‘is something we must avoid’, she said. ‘And this is why we are determined to do what is necessary to bring inflation back to our 2% target.’

Recession or not, ‘we all have to do our job’, she said, refusing to cede any ground to the idea that a gloomier growth outlook should dissuade the ECB from continuing to normalise policy. The ECB’s job would require ‘further rate increases’, she reiterated, declining again to specify the possible number, but also not repeating Thursday’s conjecture that ‘it might well be several meetings’.

On the economy, Lagarde observed – less wordily than last week but with the same point – that ‘the growth outlook compared with the [September] baseline has weakened’, and referred again to the updated projections coming in December.