ECB President: "If Inflation Rate Remains High, Interest Rates Will Move Faster"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] Christine Lagarde, President of the European Central Bank (ECB), recently stated that the inflation rate is at a worrisome level and that if high inflation continues, the ECB will accelerate the pace of interest rate hikes.

On the 28th (local time), President Lagarde said at the ECB's annual monetary policy conference held in Portugal, "We will do whatever it takes to ensure that inflation is stabilized at 2% in the medium to long term," and emphasized, "If the inflation rate remains high, the ECB can move faster to raise interest rates going forward."

President Lagarde expressed concern, saying, "The rise in energy prices is much higher than during the oil shocks of the 1970s, and the inflation rates for manufactured goods and agricultural products have not been this high since the mid-1980s," reiterating the ECB's commitment to fully combat the surge in prices. The consumer price inflation rate in the Eurozone, which consists of 19 member countries using the euro within the European Union (EU), reached 8.1% in May, the highest since statistics began in 1997. Since Russia invaded Ukraine on February 24, energy and food prices have skyrocketed worldwide, including in the EU, increasing the cost of living burden.

Accordingly, there are expectations that the ECB's interest rate hikes, starting next month, will proceed at a rapid pace. Previously, at the monetary policy meeting on the 9th, the ECB decided to keep the benchmark interest rate at the current 0% but announced plans to raise it by 0.25 percentage points in July and to increase it again in September.

This will be the first time in 11 years that the ECB raises its benchmark interest rate. Since lowering the benchmark rate to 0% in March 2016, the zero interest rate policy has been maintained for over six years, so a significant market impact is expected.