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Lagarde hints at another interest rate hike

Tan KW
Publish date: Wed, 07 Jun 2023, 07:56 AM
Tan KW
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BRUSSELS: European Central Bank (ECB) president Christine Lagarde says inflation pressures remain powerful and borrowing costs will be raised further to tackle them, cementing expectations for another interest rate hike at next week’s meeting.

With the full effects of the ECB’s already historic monetary tightening campaign still materialising, Lagarde reiterated that there’s no clear evidence that underlying inflation has peaked. Food inflation, for one, remains elevated, she said.

“Price pressures remain strong,” Lagarde told European Union lawmakers.

“Our future decisions will ensure that the policy rates will be brought to levels sufficiently restrictive to achieve a timely return of inflation to our 2% medium-term target and will be kept at those levels for as long as necessary, she said.

The remarks, while largely reiterating language many ECB officials have been using of late, indicate that the recent bout of rate increases isn’t done just yet.

Despite May bringing a second straight slowdown in the gauge of core inflation that’s currently the focus of policymakers, most investors and analysts predict another hike on June 15.

Ireland’s Gabriel Makhlouf has said the ECB is likely to raise rates at both its June and July meetings, bringing the deposit rate to 3.75% from 3.25% now.

 - Bloomberg

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