ECB’s Lagarde sticks to rate-hike plans

European Central bank President Christine Lagarde reaffirmed on Monday plans to raise the ECB’s interest rates twice this summer while fighting widening spreads in the borrowing costs of different Eurozone countries.

“These decisions underpin our previous commitments to adjust all of our instruments within our mandate, incorporating flexibility if warranted, to ensure that inflation stabilizes at our 2% target over the medium term,” Lagarde told the European lawmakers.


Lagarde restated officials’ intention to raise interest rates in July and September, signaling that the prevalent concerns over financial-market tensions are not derailing the fight against inflation.

Lagarde characterized the decision to develop a crisis measure as one that underpins a previous commitment to keep inflation under control. “We need to be absolutely certain that our monetary policy stance is actually driven to all countries of the euro area,” she said. “It’s right at the core of the mandate.”

Officials were forced to act following a blowout of Italian bond yields in the wake of their plan to tighten monetary policy in coming months. The new crisis-fighting tool is likely to feature purchases of debt from more highly-indebted nations.

The measure is meant to be finalized before the ECB’s Governing Council next scheduled policy meeting on July 20-21, people familiar with the matter have said. Lagarde said that work is under way, and declined to divulge details on how it’s supposed to function.


“Suffice to say that fragmentation will be addressed if the risk of it arises,” she told lawmakers. “And it will be done so with the appropriate instruments, with the adequate flexibility, it will be effective, it will be proportionate, it will be within our mandate. And anybody who doubts that determination will be making a big mistake.”