Base rate
Lagarde: Conditions for interest rate hike in 2022 not met
According to ECB President Christine Lagarde, it is unlikely that the conditions for an interest rate hike will be met in the coming year. Photo: Sanziana Perju / European Central Bank / dpa
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ECB President Christine Lagarde believes an increase in the key interest rate in the coming year is unlikely. The reason for the rising inflation are the high energy prices and supply bottlenecks.
The European Central Bank (ECB) is still not holding out any prospect of a key rate hike.
It is very unlikely that the conditions for an interest rate hike in the coming year will be met, said ECB President Christine Lagarde on Monday in front of the European Parliament. Inflation is still expected to weaken in the coming year. However, this will proceed more slowly than originally expected.
Lagarde again blamed rising energy prices and supply bottlenecks for the rise in inflation. However, the ECB does not see a great risk that rising wages could lead to a sustained rise in inflation. “Overall, we continue to assume that inflation will remain below our new symmetrical two percent target in the medium term,” said Lagarde. The inflation rate in October in the euro zone was 4.1 percent, well above the target value.
At the same time, economic growth is slowing down somewhat due to supply bottlenecks and the rise in energy prices, said the central bank chief. She also refers to the uncertainty caused by the corona pandemic. Recently, the number of infections has increased significantly in many countries in the euro zone and new restrictions have been adopted.
With this, Lagarde confirmed the latest statements. Recently, there has been repeated speculation in the financial markets that the ECB could raise its interest rates as early as 2022. The ECB has not even decided to end its Pepp Corona emergency program, which it uses to buy fixed-income securities such as government bonds. Lagarde has promised that Pepp will end as planned at the end of March 2022. Recently, a number of smaller central banks have already started to raise interest rates.