European Central Bank President Threatens To Keep Increasing Interest Rates During Portugal Forum

A new increase in interest rates was announced this Tuesday, June 27, by Christine Lagarde, the president of the European Central Bank (ECB).

She was speaking during the first session of today’s ECB Forum in the Portuguese town of Sintra, close to Lisbon. The three-day annual congress is attended by central bank governors, academics, policymakers and financial market experts.

In a statement, the ECB Forum on Central Banking 2023 is billed as a ‘Macroeconomic stabilisation in a volatile inflation environment’.

‘Unless there is a substantial change in the inflation outlook’, said Ms Lagarde, the ECB will ‘continue to raise rates in July’, and even ‘as far as needed’, she threatened.

The bank official admitted that inflation was in fact falling, but not quickly enough for her liking. She pointed to the industrial action in many countries where workers are asking for salary increases. This is a result of workers losing their purchasing power as unemployment falls to record lows she suggested.

All of this threatens to send wages spiralling which can only push inflation up, something that her bank is intent on preventing Lagarde insisted.

Marvellous day here at the #ECBForum in Sintra, full of interesting discussions with top policymakers and academics about monetary policy and inflation.

Looking forward to more inspiring sessions tomorrow! pic.twitter.com/4ESWFqpiGI

— Christine Lagarde (@Lagarde) June 27, 2023

She intends to keep interest rates ‘as high as possible for as long as is needed’

Raising rates as high as possible is something that the ECB will do to ‘address the dynamic of wage-price spiral decisively’, suggested some experts, as reported by portugalresident.com.

She explained that her bank will do its best to dispel ‘expectations of a too-rapid policy reversal’, by ‘keeping rates high for as long as needed’. This ultimately affects citizens residing in the 20 countries that use the Euro currency.

Lagarde continued: ‘We have achieved significant progress, but faced with a more persistent inflationary process, we cannot falter, nor yet declare victory’.

According to news reports, this forum in Portugal is taking place: ‘at a time when inflation continues to focus the attention of decision-makers after dominating the debate last year’.

Some economists disagree with Christine Lagarde’s thinking, warning instead that her bank’s raising interest rates can have the opposite effect and trigger a recession.