The president of the European Central Bank (ECB), Christine Lagarde, reiterated this Monday that the European Central Bank (ECB) will bring interest rates in the euro area to “sufficiently restrictive levels” to ensure that inflation falls on time to its target of 2%, and that these will remain at those levels “as long as necessary”.
The decision on the direction of the interest rates It will be taken based on the inflation outlook, the underlying inflation dynamics and the strength with which its transmission is transmitted. monetary politics to the real economy, Lagarde said in her second hearing of the year with the Commission for Economic and Monetary Affairs of the European Parliament.
The latest available data suggest that the indicators of core inflation pressures remain high and, while some are showing signs of moderating, there is no clear evidence that core inflation has peaked,” he asserted.
In May rate of inflation headline inflation in the euro area fell by nine tenths, to 6.1% year-on-year, while core inflation -which excludes the effect of energy, fresh food, alcohol and tobacco– fell by three tenths, to 5.3%, as Lagarde recalled.
However, he noted, there is still pressures Rising stemming from past energy costs and supply bottlenecks, while wage pressure has increased and companies in some sectors have managed to increase their profit margins.
“We are fully committed to fighting inflation and determined to achieve its return to our medium-term target of 2% on time,” Lagarde said.
The president of the ECB defended that the uploads of interest rates that the institution has applied since last July are moving “forcefully” to the financing conditions of households and companies, as shown by the increases in interest rates for loans and the decline in the volume of credit, and that the “full effects” of monetary policy “are beginning to materialize.”
The ECB started raising interest rates in July 2022 and since then it has increased them on seven consecutive occasions, up to 3.75%. In his last meeting, he reduced the rate of increases by applying an increase of 25 basis pointscompared to 50 points on previous occasions.
Before the European Parliament, Lagarde also called on European governments to withdraw the support measures they adopted to deal with the energy crisis, now that it is dissipating, in a “quick” and “concerted” way to avoid boosting inflationary pressures in the medium term, which would require “a stronger monetary policy response”.