European Central Bank president pledges to continue rate hikes to fight inflation

Nov. 4 (UPI) -- European Central Bank President Christine Lagarde Friday reiterated the determination to use monetary policy to raise interest rates in a continued battle against high inflation.

In a speech at the central bank of Estonia, she said a combination of economic shocks is causing inflation, adding that the central bank has already raised interest rates by 200 basis points in its last three meetings as it cannot allow inflation to become entrenched.

"We will therefore have to raise rates to levels that will deliver our 2% medium-term inflation target," Lagarde said in her speech. "The ultimate goal of our interest rate path is clear and we are not there yet."

Lagarde said that among the shocks are war, energy, disrupted supply chains, and reallocation of demand. She said Europe has "not witnessed such a rapid shift in the inflation environment" since the beginning of the European Union.

In October European inflation jumped to 10.7%, the first time in European Union history that it exceeded the 10% mark.

Lagarde said the euro area economy has been hit by an unprecedented series of economic shocks on both the demand and supply sides of the economy. From pandemic lockdowns to supply chain disruptions, energy production cuts and Russia's invasion of Ukraine.

She said there's a faster and stronger pass-through of those shocks into prices, fueling high inflation. The cut in gas supplies caused by the Russian invasion alone, she said, is "a major structural change which will have ramifications for several years."

She concluded by saying, "We must not, and will not, let high inflation become entrenched. We are committed to bringing inflation back down to our medium-term target, and we are determined to take the necessary measures to do so."