Lagarde ensures ECB is ‘aware’ of the impact of rising interest rates on families

European Central Bank President Christine Lagarde assured this Monday that she is “aware” of the “pain and suffering” caused by raising interest rates to the highest level in the history of the eurozone, but insisted on price stability. .

“Based on the current assessment, I believe there is a significant contribution to a timely return of inflation to the 2% target. Do we also remember the pain it causes and the suffering that exists? Yes, we are aware, I can assure you,” said the head of the European Central Bank (ECB) at a regular hearing at the European Parliament’s Economic and Monetary Affairs Committee in Brussels.

Responding to a question from Socialist MEP Pedro Márquez about the impact on families of successive increases in key interest rates in the eurozone, Christine Lagarde said: “We know that, for example, 30% of households in member states have variable-rate mortgages. rate, and it’s difficult, we know that.”

“And we also know that fuel prices, gas prices at the pump, energy prices in general also take a heavy toll on low-income families, yes, we know that. But we also know that our mission – our duty – is to ensure that inflation returns to its targets in a timely manner,” the ECB President emphasized.

And he concluded: “The faster we achieve this, the more stable prices will be and the less painful it will be for the future, both for those who invest and for those who take out loans.”

Christine Lagarde said future central bank decisions “will ensure that the ECB’s key interest rates are kept at sufficiently tight levels for as long as necessary.”

This Monday’s discussion comes a week after the ECB announced a further hike of three key interest rates by 25 basis points, the same as at its previous meeting, placing the deposit rate at the highest level in eurozone history.

It was the 10th straight rate hike by the central bank, which has raised interest rates by 450 basis points since July last year, the fastest growth cycle in euro zone history.

In its summer macroeconomic forecasts published in mid-September, the European Commission revised down its forecast for euro zone inflation this year to 5.6%, saying tight monetary policy was “working” but warned of revenue losses and worsened the forecast. for 2024.

Also on the day, the community’s chief executive announced that the “very weak” economic activity of recent months in the eurozone and EU, which was expected to persist, had led to a downward revision of forecasts for economic growth in 2024 to 1.3%. and 1.4%.

Inflation has been falling in recent months from historic highs due to the economic reopening from the Covid-19 pandemic, the energy crisis and the economic fallout from the war in Ukraine, but is still above the 2% target. ECB for price stability.

To achieve this, the ECB has tightened monetary policy, consistently raising interest rates, but now at a slower pace.