The Strategist

Head of ECB expects raising rate above neutral level



09/21/2022 - 09:50



To combat unacceptably high inflation, the European Central Bank may have to increase interest rates to a point where they restrict economic expansion, said ECB President Christine Lagarde.



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The key rate consistent with our goal would be in restrictive area, she added, if there was any belief that strong inflation posed a threat to our ability to keep inflation expectations in check.

ECB policymakers have talked about a pause in the rate hike cycle, with the ECB reaching a so-called "neutral" level that neither stimulates nor constrains economic growth, but a growing number of Governing Council decision-makers now see the risk of having to raise the rate higher.

Inflation is already above 9% and may continue to rise, while long-term inflation expectations, a key focus for rates, are now climbing above the 2% target.

source: ecb.europa.eu

 




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