Euro zone inflation has not peaked and the risk is that it will turn out even higher than currently expected, European Central Bank President Christine Lagarde said today.
“We do not see the components or the direction that would lead me to believe that we’ve reached peak inflation and that it’s going to decline in short order,” Lagarde told the European Parliament.
“Whenever I ask my top-notch economists at the ECB … about the risk, the answer that I get at the moment is (that) risk is to the upside, without qualifying the upside.”
Ms Lagarde kept her options open as to the size and number of the ECB’s future interest rate hikes today.
She said this will depend on a number of variables.
“How much further we need to go, and how fast we need to get there, will be based on our updated outlook, the persistence of the shocks, the reaction of wages and inflation expectations, and on our assessment of the transmission of our policy stance,” Lagarde said.
Investors have been speculating about whether the ECB will raise its policy rates by 50 or 75 basis points at its next meeting and about the level at which borrowing costs will peak.