Inflation in the eurozone is “currently well on track to reach the two percent mark towards the end of next year,” says Lagarde in a guest article for the “Rheinische Post” at the weekend.
“However, it will take some time before inflation is completely banished from the economy. Until then, not everything will go smoothly. Vigilance, commitment and perseverance will be required along the way,” writes the ECB President.
“For this reason, interest rates must remain restrictive for as long as necessary to ensure price stability in the long term. In other words, we must keep our foot on the brake for a while longer, although not quite as firmly as before,” Lagarde explained.
When is the brake released?
“Our future monetary policy decisions will depend on whether we can continue to observe that inflation returns to our target in a timely manner, that price pressures in the economy as a whole are easing and that our monetary policy continues to work effectively against inflation. These factors will dictate when it is time to further release the brakes,” wrote the central bank chief.
The ECB cut its key interest rates by 0.25 percentage points on Thursday. It was the first rate cut after a steep rise in interest rates to combat inflation.
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Source: Nachrichten
