The President of the European Central Bank (ECB), Christine Lagarde, has again raised the prospect of further interest rate increases. “Currently, we expect interest rates to be raised further in the next few sessions to dampen demand and guard against the risk of a prolonged upward shift in inflation expectations,” Lagarde told the European Parliament’s Economic and Monetary Affairs Committee on Monday. “Inflation is still far too high and is likely to stay above our target for a long time,” she stresses.
In August, the annual inflation rate rose to a record 9.1 percent. The ECB is only aiming for a rate of two percent. Energy and food prices remain the main drivers, Lagarde said. But also the devaluation of the Euroon the foreign exchange market, inflation is driving up.
The economic outlook is darkening, Lagarde said. Activity is likely to weaken “substantially” in the coming quarters. High inflation weighs on consumer spending and production. This development is amplified by the shortage of natural gas. She also referred to the weakening global economy and the high level of uncertainty.