“It is not yet clear whether structural inflation has peaked in the eurozone,” European Central Bank President Christine Lagarde said, predicting a further increase in borrowing costs. And this despite the fact that May inflation in the Eurozone fell to 6.1% from 7% in April, which is the lowest level in at least a year.

“We have made it clear that we still have a long way to go to bring interest rates to levels that will be quite restrictive,” Lagarde said Thursday in a speech in Hannover.

Lagarde made the announcement after the release of inflation data that indicated a slowdown, resurrecting scenarios for possible easing of the tightest monetary policy cycle in the eurozone’s history.

However, core inflation, which excludes food and fuel price volatility, remains high, well below its 2% target, although it has eased to 5.3% from 5.6%.

Lagarde said officials are unhappy with the inflation outlook, but that monetary policy is being “cruelly” shifted to credit, and the measures taken so far have had a significant impact. “This increase is already having a strong impact on bank lending,” he said. “And we know that, having raised rates so much and so quickly, we still have significant tightening yet to come.”

Analysts are expecting another 25 basis point rate hike on June 15 and believe the money value cycle will end with another step. Deposit rates in the eurozone are already at 3.25%, below zero last July.

In addition, ECB President Klaus Nott, a member of the Board of Directors, warned investors that interest rates may not fall even in 2024. “Markets are already factoring in interest rate cuts next year,” Knott said in a speech in Brussels. “If they have to change their estimates, which is likely, that could lead to further adjustments,” he said.

In the fastest tightening in its history, the ECB raised interest rates to 3.25%. Once they reach their peak, Knott says, they have to stay there for a significant amount of time.

The head of the Dutch central bank also said that government borrowing, which has risen rapidly during the pandemic, could create problems “combined with high interest rates.” “This applies to large debts that need to be converted and reinvested in the short term,” he said.