Hawkish messages from ECB President Lagarde

European Central Bank (ECB) President Christine Lagarde has stated that it is vital that inflation rates above the 2 percent target do not become permanent in the economy. European Central Bank (ECB) President Christine Lagarde stated that they will take all necessary steps to return inflation to the 2 percent target and signaled that “significant” interest rate hikes are on the way at upcoming meetings. Speaking in Germany on Monday evening, Lagarde said that borrowing costs will need to be increased steadily until they reach sufficiently restrictive levels and will remain at those levels for as long as needed. “We will maintain our current policy to ensure that inflation returns to our target in a timely manner,” Lagarde said, adding that “it is vital that inflation rates above the ECB’s 2 percent target do not become entrenched in the economy.” Different tones from ECB officials In a statement yesterday, ECB member Boris Vujcic stated that interest rate hikes of 50 basis points were still appropriate, while Yannis Stournaras pointed to the slowdown in the economy and called for more gradual steps. ECB Governing Council Member Peter Kazimir said he was in favor of a 50 basis point rate hike in the next two meetings. Bundesbank President Joachim Nagel also said he believed the ECB could return inflation to target without sending the economy into recession.