We will raise the interest rates on time to a level that will eventually reach our medium-term inflation target,” he said. The European Central Bank aims for price stability in the euro area with 2 percent inflation in the medium term. Consumer prices in the euro area in October were 10.6 percent higher than in the same month of the previous year.
“Inflation in the euro area is very high,” Lagarde said in Frankfurt. Also, the risk of recession has increased, although the latest data on gross domestic product growth surprises positively.
After a long period of hesitation, the ECB has been trying to contain hyperinflation by raising interest rates sharply since July. The key interest rate in the Eurozone, which has been frozen at a record low of zero percent for years, is now at 2.0 percent.
“Interest rates are and will continue to be the most important tool for setting our political course. However, we also need to normalize our other policy instruments and thus increase the momentum of our interest rate policy,” he said.
The ECB balance sheet, which has swelled over the years as a result of billions of dollars in securities purchases, needs to be “moderately” and “predictably” normalized. “In December, we will present the most important principles in our purchasing program to reduce bond holdings,” Lagarde said. The Governing Council will meet again on December 15.
(SDA)