ECB's Lagarde says data will tell if December rate hike is needed
TLT•ECB President Christine Lagarde said indicators and new staff projections will help determine whether a rate hike is warranted in December. The bank held its deposit rate at 2.5% last week, while euro zone inflation rose to 4% in October.
1. Decision depends on data
The European Central Bank is assessing indicators to determine whether an interest rate hike is necessary next month, outgoing President Christine Lagarde said Thursday. The ECB held its key deposit rate at 2.5% last week, and its staff will publish economic projections in December.
2. Inflation and energy costs
Euro zone inflation rose to a three-year high of 4% in October, driven by food and energy costs, and analysts expect it to climb further in the coming months. Lagarde said inflation was too high relative to the ECB's target of around 2%, but that energy was predominantly behind the increase.
3. Balancing economic effects
Lagarde said energy costs were bringing growth down and prices up, and the ECB was watching indirect effects of the energy shock triggered by the Iran war. She said artificial intelligence was fuelling investment demand and contributing to economic resilience, making it difficult to distinguish supply- and demand-driven shocks. The ECB must avoid letting inflation expectations run away or inflation spread through the economy, she said.
