Lagarde: Inflation in the Eurozone remains High, another Interest Rate Hike is Imminent

“Core inflation in the Eurozone will remain high for the foreseeable future, so a European Central Bank (ECB) interest rate hike of up to 50 basis points later this month looks increasingly certain”, ECB President Christine Lagarde told the Spanish media group Vocento.

The ECB has already raised interest rates by three percentage points since July and has essentially promised another half-percentage-point increase on March 16, but investors have recently suggested an even tougher move given poor inflation data.

Lagarde said a marked increase was now "very, very likely" but also warned that core inflation, which filters out volatile food and fuel prices, could remain uncomfortably high even as headline inflation eases in coming months.

"In the short term, core inflation will be high," Grupo Vocento quoted Lagarde as saying.

Policymakers have warned recently that the ECB's interest rate hikes should continue until core inflation reverses and begins to fall towards the ECB's 2% target.

Core inflation rose to a record 5.6 percent last month, and some analysts fear the increase is already being driven by a sharp rise in wages in the services sector, making price growth more durable and harder to break.

"We must continue to take all necessary measures to bring inflation back to 2%. And we will," said Lagarde.

She added that the Eurozone economy was holding up better than feared and output should pick up from near-stagnation in the final quarter of 2022.

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