Lagarde says the ECB is not committed to continuing to raise rates, despite pressure from Germany

President of the European Central Bank (ECB), christine lagardeemphasized this Wednesday that the subject did not undertake any obligation regarding the development of interest rates, which is why he wanted to make it clear that it cannot be taken for granted that they will continue to increase or that the adjustment of the price of money is over.. On conference with central bank observers in Frankfurt, the French assured that “with great uncertainty, more importantly, the pace of interest rate movements depends on the data».

“This means, ex ante, that we are not committed to raising more, nor are we done raising interest rates,” he explained, adding that, “as I explained last week, if the baseline scenario in our latest projections is confirmed, we still have the basis to ensure a reduction in inflationary pressures. He slipped, therefore, that if there is no more turbulence like the one caused on the financial market by the bankruptcy of the American bank SVB and the rescue of Credit Suisse, it is normal that rates will continue to rise in order to try to tame inflation.

This is exactly what they are asking from Germany. President of the association BundesbankJoachim Nagel, stated in an interview for Financial Times that the ECB’s job in fighting the rising cost of living is “not done”, so if it wants to tame persistent inflation, it will have to be “stubborn” and keep raising interest rates.

For the president of the German central bank, the inflation rate in the eurozone should still fall “significantly and sustainably” from the current 8.5% before the central bank stops raising interest rates. “There is still a long way to go, but we are approaching the restrictive area,” he pointed out.

From 0 to 3.5% in nine months

The ECB has increased the money price by 350 basis points to 3.50% since July last year. The ECB president stressed that “while headline inflation is likely to fall sharply this year due to lower energy prices and easing supply bottlenecks,” core inflation, which excludes energy and food, is strong. “In such an environment, our ultimate goal is clear: we must – and will – bring inflation down to our medium-term target on time,” Lagarde said.

However, given the current conditions, the ECB’s interest rate strategy will depend on the economic situation. For this reason, the rate of change in the price of money will depend on how the ECB thinks inflation will develop, what happens to core inflation and how the increases in the price of money it has undertaken are transmitted to markets and the real economy so far.

In order to reduce inflation, it is important that monetary policy acts in a restrictive direction, and this process is starting to work now, Lagarde believes. He also made it clear that they have enough tools to provide liquidity to the financial system if needed given the volatility in financial markets in recent weeks.