European Central Bank (ECB) chief Christine Lagarde said yesterday that interest rates need to continue rising at a “steady pace” in order to avoid inflation becoming entrenched.
While energy prices have recently come down, Lagarde said underlying inflation continues to rise.
“It is vital that inflation rates above the ECB’s two-per cent target do not become entrenched in the economy,” she said at an event hosted by the operator of the Frankfurt stock exchange.
In less than six months the ECB has raised its key policy rates by 2.5 percentage points, the fastest increase in its history, AFP reported.
“ECB interest rates will still have to rise significantly at a steady pace to reach levels that are sufficiently restrictive, and stay at those levels for as long as necessary” to bring inflation down, Lagarde added.
“We must bring inflation down. And we will deliver on this goal,” she vowed.
ECB policymakers are expected to raise rates at their meetings in February and March.
“We will stay the course to ensure the timely return of inflation to our target,” said Lagarde.
