In an interview with La Tribune Dimanche, Lagarde stated, “We want to bring inflation below 2% and we will succeed. An inflationary spiral “must absolutely be avoided.”
The deposit rate reached a record 4% last month as the ECB raised borrowing costs for the tenth consecutive month. The majority of policymakers have stated that holding interest rates at this level for a while should be adequate to return inflation to the target range, however more hawkish officials have indicated additional rate hikes may be necessary.
She reiterated her institution’s most recent policy position: “The ECB’s key interest rates have reached levels that, if maintained for a sufficiently long time, will contribute in a decisive way to bringing inflation towards our target as soon as possible.”
Although Lagarde emphasised that it was not her intention to cause a recession, the central bank’s aggressive rate policy has had a negative impact on the economy, which has hardly expanded this year.
She agreed that Germany is a factor weighing on the European outlook but claimed to be “not pessimistic” about short-term growth prospects.
According to her, growth is becoming weaker while inflation is continuing but slowing down.
The International Monetary Fund, with the exception of the US, has lowered its predictions as a result, according to Lagarde.
On Tuesday, the IMF is expected to release updated economic forecasts in advance of its annual conference.