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Lagarde: 75bp Hike Unanimous; We Will Raise Further

ECB

First question for Lagarde (from MNI's Luke Heighton): Could you give a flavour of the GC discussion that led to the 75bp move? Following today’s decision, how close are rates to the terminal level?

  • A: The GC unanimously decided to raise rates by 75bp. We had different views around the table but the outcome was unanimous. Staff presented projections, we had inflation numbers and the growth outlook. We had a good analysis of inflation.
  • While we conclude that energy is the major source of inflation, we also have inflation that is spreading. We have a range of product and service inflation that is north of 4%. In the face of inflation that is extremely high, determined action had to be taken. We are on a journey to normalise monetary policy that started back in December.
  • We believe that the deviation from target warrants a frontloading of policy rate tightening. This is not an isolated case, we will raise further. This does not mean that 75bp is a new normal. We will decide on a meeting-by-meeting basis.
  • Zero is not the neutral rate and where we are is not the neutral rate. We are heading in that direction. It takes a front loading and it takes more hikes in subsequent meetings. We are certainly heading there as that it is where we will deliver on our 2% inflation target.
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