European Central Bank President Christine Lagarde said borrowing costs will be raised at the next “several meetings” to ensure inflation expectations remain anchored and price gains return to the target, Bloomberg reports.
Addressing an event Wednesday in Frankfurt, Lagarde said bringing inflation back to the 2% medium-term goal is the ECB’s main mission, despite increasing concerns about recessions in Germany and the 19-nation euro zone.
“We will do what we have to do, which is to continue hiking interest rates in the next several meetings,” she said. “Our primary goal is not to create a recession. Our primary objective is price stability and we have to deliver on that. If we were not delivering, it would hurt the economy far more.”
The ECB has followed the US Federal Reserve in deploying outsized rate hikes to tackle the fastest inflation since the euro was introduced. But the advances in borrowing costs coincide with rising fears of a downturn, stoked this week by Russian threats to further cut energy supplies.
Consumer confidence in the euro area is already at a record low. A gauge of German sentiment plunged further and is at its worst level since the start of the pandemic, figures showed Monday.
While Europe’s economy held up exceptionally well in the first half of 2022, next year will be much more difficult, Slovakia’s central bank chief Peter Kazimir said Wednesday.
But Lagarde isn’t alone in prioritizing inflation over growth. Other officials say rates should be raised to the neutral level that neither stimulates nor restricts the economy – thought to be somewhere between 1% and 2% – before they assess whether more action is needed. The ECB’s deposit rate is currently 0.75%.