ANKARA
The European Central Bank (ECB) must continue to raise interest rates to reduce inflation, even if the side effect of tight monetary policy is weaker growth, the bank’s president said on Wednesday.
The ECB has to deliver on its main aim of price stability, Christine Lagarde asserted at an event in Frankfurt.
“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.”
Amid the energy crisis triggered by the Ukraine war, annual inflation in the euro area spiked to 9.1% in August, while consumer confidence plunged to its lowest level on record in September.
“Roughly 18 months ago, I’m sure that very few of you in this room remember where inflation was. It was in negative territory. Now we are at plus 9.1%,” Lagarde said.
She said no one projected this situation as it was largely “assumed that it was going to be transitory, because in the textbook, supply bottlenecks eventually fade out, energy prices eventually return.”
“Well, this didn’t happen. And what we are seeing and have been seeing for the last few months, and accelerated by the war in Ukraine, has been more persistent and of a magnitude that nobody had expected,” she explained.
The ECB this month hiked its three key rates by 75 basis points, a historic move in the face of record-high inflation and the war-driven energy crisis, but one that has created new risks for the entire region.
