In an interview for Japan’s newspaper éomiuri Shimbunić, Lagarde said significant changes in economic data would be needed to change the current course of the ECB monetary policy.
She stressed that inflation in the Eurozone reached 4% in October, a higher level than predicted several months ago, though in line with market expectations.
According to Lagarde, rising prices are mainly related to energy.
Inflation in this sector rose to 20.8% in October, up from 18.9% in September, as a result of the Middle East conflict and the reduction of oil refining capacities to a global level. Food prices have also marked increases.
However, it underlined that the basic inflation indicators remain relatively stable.
Basic inflation, which rules out energy, food, alcohol and tobacco, was 2..5% in October, unchanged compared to September.
Lagarde warned that the longer inflation remains at high levels, the greater the risk of it leaving the medium-term BEC target.
Asked whether the bank would raise interest rates in December, she said decisions would be made on the basis of economic data and will be reviewed at any meeting of the Steering Council.
For now I can’t say that we’re definitely gonna do this in December. What I know is that, based on the information we have today, considerable changes would be needed for policy guidance to differ from the one I expect currently, Lagarde said.
In late October, the ECB decided to keep the basic deposit rate unchanged at 2.5%, but some bank officials have signaled that another increase in December remains possible.
During a financial education conference in Milan on November 6th, Lagarde also said the bank would closely follow economic indicators, during the coming weeks to determine whether an increase in interest rates is necessary.
She explained that increasing energy costs is affecting both economic growth and prices, making decision-making more complicated for monetary policy.
According to her, the ECB should avoid reducing prices to spread throughout the economy and affect the expectations of businesses and consumers for future inflation.
The bank is expected to publish new economic projections next month, which will be one of the key elements for the decision on interest rates in December.
The decision-making comes at a moment when the Eurozone economy faces increased pressures from energy costs, geopolitical uncertainty and price hikes, while the EC intends to keep inflation close to the 2% target.
Source Layer: RTKLive