ECB could rase interest next month – Lagarde

The European Central Bank could raise interest rates “as soon as next month” if inflation continues to overshoot its 2% target, ECB President Christine Lagarde has said.

Speaking in Frankfurt, Lagarde said that even a modest and temporary inflation overshoot caused by the recent energy shock could justify a “measured” policy response.

“If the shock gives rise to a large though not-too-persistent overshoot of our target, some measured adjustment of policy could be warranted,” she said.

She added that the ECB must act if inflation risks becoming entrenched, warning that a failure to respond could create communication risks and weaken inflation expectations.

Lagarde said the bank stood ready to act “at any meeting” and would not be “paralysed by hesitation,” though she stressed it would wait for sufficient data before making any move.

Financial markets now expect multiple rate hikes this year, as inflation is projected to remain above target for an extended period under several ECB scenarios.

The comments come as policymakers weigh the impact of higher energy prices linked to global geopolitical tensions on the eurozone economy.

via The Guardian