In his speech to the European Parliament European Central Bank President Christine Lagardeconfirmed that the ECB intends to increase Borrowing cost for another half a day next month. “Given underlying inflationary pressures, we intend to raise interest rates again by 50 basis points at our next meeting in March,” Lagarde told MEPs in Strasbourg. For his part, ECB Chief Economist Philip Lane, speaking in London, stressed that the impact of the recent interest rate hike on inflation remains to be seen. “Money policy actions are tightening financing conditions, reducing lending and changing the behavior of households and businesses,” he stressed yesterday. “At the same time, the ultimate impact of the measures we are taking to date on inflation continues.” The decisions of the relevant officials are aimed at returning the rate of price growth to 2% compared to the fourfold level at which it is now. Models used show that tightening monetary policy will slow inflation by 1.2 percentage points in 2023 and 1.8 percentage points in 2024, he added.

As Christine Lagarde clarified, after the March meeting, an assessment will be given to the further course of the ECB’s monetary policy. Despite three months of moderate inflation, ECB officials are sending the signal that the battle against rising prices is not yet won. They are concerned about continued underlying price pressures that could further intensify as workers demand higher wages to offset the decline in purchasing power due to soaring inflation. Across the Atlantic, the Federal Reserve is facing a similar challenge, leaving open the possibility of more rate hikes than previously anticipated. Several ECB officials stressed that a half-point rate hike planned for next month is unlikely to be the last in a cycle that, thanks to monetary tightening, is already the most aggressive in the institution’s history.

Finally, Irish Central Bank Governor Gabriel Callauf, like Lagarde, said late on Tuesday that he was confident “decisive action” would continue.