Lagarde stays quiet on ECB rate rises beyond 2022

European Central Bank President Christine Lagarde said on Monday she would not “venture” into speculation over interest rate rises in 2023 amid pressure for the bank to define its response to high inflation.

“I don’t think I will venture into 2023,” Lagarde told the European Parliament’s Committee on Economic and Monetary Affairs, repeating her statement from earlier in the month that rates were “very unlikely” to change in 2022.

“Inflation has been surprising to the upside for a while,” Lagarde said after the measure hit 4.1 percent in the eurozone in October, a 13-year high driven by soaring energy prices.

The bank nonetheless expects inflation to remain below its two-percent inflation target “in the medium term”, Lagarde said.

The ECB expected “higher wages in 2022 than in 2021” as employees set about negotiating new pay deals with business, she said.

But there was “no evidence” so far that higher wages were feeding back into prices, creating higher inflation over the long term.

An early withdrawal from stimulus was “not desirable” while businesses and consumers struggled with high energy prices, and would “represent an unwarranted headwind for the recovery”, Lagarde said.

The ECB has long held interest rate at historic lows, including a negative bank deposit rate that means lenders pay to park excess cash at the central bank.

The bank’s policymakers will meet on December 16 to decide on the future of its massive pandemic-era bond purchasing programme.

The 1.85-trillion-euro ($2.12-trillion) pandemic emergency bond-buying programme (PEPP), the ECB’s main crisis-fighting tool, is expected to come to an end in March 2022.