The president of the European Central Bank (ECB), Christine Lagarde, in her latest speech emphasized that lending rates will remain high as long as necessary to control prices even if the economy faces difficulties.
"Going forward, we will ensure that the main ECB interest rate will be set at an adequate level for as long as necessary," Lagarde told lawmakers in the European Parliament.
"We remain determined to ensure that inflation returns to the moderate target of 2% in due course," he said on Monday in Brussels.
The ECB raised its key policy rate to 4% this month, a level that most economists and investors thought would be the peak in a more than year-long campaign to stamp out inflation.
Several Council members have confirmed the assessment, with Spain's Pablo Hernandez de Cos reiterating on Monday that current levels will bring price growth back to the 2% target if sustained for a long period of time. Meanwhile, the Governor of the Bank of France, Francois Villeroy de Galhau, said the ECB should not test the economy "until it is severe", signaling that he would prefer not to raise rates again.
However, some legislators are not sure that the highest peak has been reached or not. The president of the Bundesbank, Joachim Nagel, said last week that it was too early to make such a statement because inflation was still too high and was only expected to decline slowly.
The main challenge is to assess how the economy will respond to the monetary tightening implemented from July 2022.
