ECB President Christine Lagarde said in a speech that after increasing interest rates by 200bps, “we expect to raise rates further”. He added that, “withdrawing accommodation may not be enough to bring inflation back to our target”. But how much further to go, and how fast, will be determined by a few factors.
The first and most important factor is “inflation outlook”. The second factor is “corresponding policy stance and its transmission lags into demand and inflation”.With the lag in transmission and prevailing uncertainty, “the rate path ahead will look different depending on the contingencies we face.”
