European Central Bank President Christine Lagarde said on Tuesday that inflation in the euro zone was still too high, so the ECB should continue to tighten monetary policy and avoid declaring victory in the battle over consumer prices, Reuters reported, citing Reuters. from Agerpres.

The ECB has raised the cost of borrowing at every monetary policy meeting over the past year, pushing interest on deposits out of negative territory to 3.5%, and has promised more hikes to try to stem rising inflation.

“It is unlikely that the central bank will be able to say with certainty that interest rates have peaked in the near future,” Lagarde said at the ECB’s annual forum in Sintra, Portugal. “Without major changes in the forecast, we will continue to raise interest rates in July,” Lagarde added.

Eurozone core inflation was 6.1% in May, down from 7% in April, but well above the ECB’s inflation target of 2%.

“Inflation in the euro area is too high and it seems that it will remain so for a long time… This persistence is caused by the fact that inflation feels its impact on the economy in stages, as different economic agents try to transfer costs to the account of others,” said Christine Lagarde .

Although the eurozone recently entered recession, companies are not laying off workers, an unexpected development that is helping to boost wages. Another problem is that much of the employment growth is in low-productivity sectors. “All this means we face several years of rising nominal wages, with pressures on labor costs intensifying due to limited productivity growth,” Lagarde said.

All these developments force the ECB to make a clear commitment to maintain high interest rates for a long period. “We need to make it clear that we will stay at these levels as long as necessary. This will ensure that rate hikes do not create expectations of a too-fast reversal of monetary policy and allow the full impact of our previous actions to materialize,” the ECB president emphasized.

By raising the cost of credit, central banks want to curb demand for real estate, consumer or investment loans from companies, which according to traditional economic theory leads to a slowdown in price growth.