European Central Bank President Christine Lagarde has reiterated the central bank’s determination to act to contain record levels of inflation. “We will do what we have to do. That means raising interest rates in the next few meetings,’’ Lagarde said on Wednesday in Frankfurt. If the ECB did not fulfil its mandate to ensure price stability. “It would hurt the economy much more,’’ she said.
The Frankfurt-based central bank seeks to keep inflation stable at around 2 per cent. In August, consumer prices in the currency area were 9.1per cent above the level of the same month last year. Soaring energy prices and supply bottlenecks are among the factors that have been fuelling inflation for months. The euro currency guardians long interpreted rising inflation as a temporary phenomenon.
There were concerns that the rapid normalisation of the loose monetary policy that has been in place for years would stifle the economy. Lagarde spokes of forecasting errors, saying that current developments were much greater in magnitude than what the bank had expected. After two hefty rate hikes in July and September, the euro area’s key interest rate now stands at 1.25 per cent. The next regular meeting of the ECB Governing Council is scheduled for Oct. 27.