By Laurie Laird
LONDON (MaceNews) – The European Central Bank raised its three main borrowing rates by 75 basis points on Thursday and promised to tighten further with inflation at a record high and moving further from its target.
“We are so far away from the rate that will return us to 2%,” said ECB President Christine Lagarde, addressing reporters after the bank’s landmark rate decision. “Inflation remains far too high and is likely to remain above our target for an extended time.”
Lagarde reiterated that policy will be decided by a meeting-by-meeting basis, but she stressed that current interest rates remain stimulative, and refused to commit “to incrementally-smaller” rate hikes at current meetings.
The rate decision came as ECB staff dramatically revised inflation forecasts for the coming years. HICP is expected to average 8.1% in 2022, up from the 6.8% pace predicted just three months ago, before falling to 5.5% next year (versus the 3.5% forecast in June) and returning to near-target 2.1% in 2024.
Lagarde also admitted that euro depreciation could exacerbate already-high inflation, although she noted that the single currency has held up better against a basket of currencies than it has against the dollar.