The European Central Bank (ECB) will raise interest rates until Eurozone inflation drops to 2 percent, ECB President Christine Lagarde said during a visit to Tallinn on Friday. She hinted that further rises are in the pipeline.
The actions already taken will not be fully felt for a year or two, Lagarde said while giving a lecture at the Bank of Estonia.
The ECB will continue to raise rates until inflation drops to 2 percent, she told ETV's evening news show "Aktuaalne kaamera" (AK).
Inflation in the Eurozone currently averages 10 percent, but Estonia has the highest at 22.4 percent and it has been above 20 percent since May.
"We are not going to bring the price of petrol down at the petrol station next week. We will not smooth out the bottlenecks in supply chains in the next month. What we are doing takes time," she told AK.
Presenter Johannes Tralla asked Lagarde to explain to viewers why the ECB is raising rates, which pulls up the Euribor and in turn impacts consumer home loan payments.
"If we do not fight against inflation, inflation would stay around and prices would continue to go up and up and up and up. That's not what people want. People want stability of prices so that you know where to invest, you know whether you can keep your job, whether you can employ somebody, because prices are stable. That's what we need to restore. And, of course, there is no smooth easy solution to that. We have to use the tools that are most useful and at the current juncture it is interest rates that are the most important too to use and the most efficient tool to use in order to bring inflation down. It will take a bit of time," she said.
Asked how long it will take and just how high interest rates could rise, Lagarde did not give an exact answer.
"I am not going to give you a number because I do not know what that number will be. What I know is that it has to be the number that will bring inflation down, back to 2 percent. That will depend on the inflation outlook, the economic circumstances, the time lag that it takes for monetary policy to impact the economy. All I know is that it will be more than we have at the moment," she said.
Watch the interview, in English after the introduction, below.
Editor: Merili Nael, Helen Wright
Source: Aktuaalne kaamera