President Christine Lagarde has today conveyed that the European Central Bank will continue to increase borrowing costs, even with economic activity expected to slow "significantly."
"We expect to raise interest rates further in the next few meetings to dampen demand and control the risk of a continued shift in inflation expectations," Lagarde said.
In a separate statement to European Union lawmakers in Brussels, "Our future policy rate decisions will continue to depend on data and follow a meeting-by-meeting approach,".
Relentless inflationary pressures fueled by Russia's war in Ukraine and the resulting energy crisis have prompted the ECB to begin raising rates for the first time in more than a decade. This month, the ECB has raised interest rates by 75 basis points. The question is how to proceed with this move as interest rate hikes are accompanied by growing recession forecasts.
In Germany, one of Europe's largest economies, data on Monday showed business confidence fell to its worst level since the start of the pandemic. Consumer confidence in Europe is at an all-time low.
ECB officials, however, said the economic weakness would not prevent them from raising interest rates.
Money market investors expect the ECB to raise interest rates by another 75 basis points. The next step will depend largely on this month's inflation reading, which will be released on Friday. Economists see prices jumping 9.7% from a year ago
