Interest rates will stay high 'as long as necessary,' the European Central Bank's leader says
The head of the European Central Bank says interest rates will stay high long enough to restrict business activity for “as long as necessary” to beat back inflation because upward pressure on prices “remains strong.”
FRANKFURT, Germany — The head of the European Central Bank said Monday that interest rates will stay high enough to restrict business activity for “as long as necessary” to beat back inflation. Still, she sympathized with homeowners who have seen their mortgage payments jump.
Christine Lagarde said rates would stay high because upward pressure on prices “remains strong” in the 20 countries that use the euro currency.
«Strong spending on holidays and travel” and increasing wages were slowing the decline in price levels even as the economy stays sluggish, she said. Annual inflation in the eurozone eased only slightly from 5.3% in July to 5.2% in August.
“We remain determined to ensure that inflation returns to our 2% medium-term target in a timely manner,” Lagarde told the European Parliament’s committee on economic and monetary affairs. “Inflation continues to decline but is still expected to remain too high for too long.”
The ECB this month raised its benchmark deposit rate to an all-time high of 4% after a record pace of increases from minus 0.5% in July 2022.
“Do we also have on our mind… what pain it inflicts? It is on our mind, I can assure you,” Lagarde said during a question-and-answer period with lawmakers. “And yes, we know that 30% — 30% — of the households in the member states have variable interest rate mortgages. It is hard, we know that.”
She noted the burden of inflation on lower-income households that pay a larger share of their income on basics like energy, saying that returning inflation
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