Inflation in the Euro Area is too high and is set to remain so for too long, ECB President Christine Lagarde said during the ECB Forum on Central Banking in Sintra, Portugal. Wage growth is now pressuring inflation which is entering a second stage and is set to linger for some time. As a result, the ECB needs to bring interest rates into sufficiently restrictive territory to lock in policy tightening. It is unlikely that in the near future the central bank will be able to state with full confidence that the peak rates have been reached, Lagarde added. In June, the ECB raised interest rates by another 25bps, bringing the rate on main refinancing operations to 4%, the highest level since the 2008 financial crisis, and the rate on the deposit facility to a 22-year high of 3.5%. Also, President Lagarde stated that the ECB had more ground to cover and would likely continue raising rates in July.
