Lagarde supports “several” increases in borrowing costs to reach a neutral rate

Lagarde supports “several” increases in borrowing costs to reach a neutral rate

By Scott Kanosky – The European Central Bank will strengthen during its next “many meetings” before it reaches a level that is not conducive to economic growth, according to ECB President Christine Lagarde.

Speaking at an event in Germany, Lagarde promised the central bank would do “whatever we need to do” to calm the tension, adding that this would include a series of upcoming hikes in borrowing costs.

“Our primary goal is price stability, and we have to achieve that,” Lagarde said. “If we don’t implement, that will hurt the economy a lot more.”

She added that the ECB’s “first destination” is to achieve a return to the so-called “neutral rate”, which neither stimulates nor impedes growth. European Central Bank officials claimed that this mark could range from 1% to 2% in the eurozone.

The Frankfurt-based central bank raised interest rates by a combined 125 basis points in its two previous two – the fastest rate of hikes on record. The ECB’s main deposit rate, which provides effective minimum money market rates, is now 0.75%, while the refinancing rate is 1.25% and the overnight lending rate is 1.50%.

Elsewhere on Wednesday, Finnish Central Bank President Olli Rehn suggested that the neutral rate could be reached before Christmas, as he urged the European Central Bank to take “firm action” to tame rising consumer prices.

Meanwhile, Slovak Central Bank President Petr Casimir has called for a 75 basis point rate by the European Central Bank next month.

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