ECB's Lagarde says euro area inflation far too high

The head of the European Central Bank said that inflation in the single-currency bloc was "far too high" and that policymakers expected interest rates to continue rising.

In remarks prepared for a speech, Christine Lagarde, went on to say that "withdrawing accommodation may not be enough".

Indeed, "historical experience suggests that a recession is unlikely to bring down inflation significantly, at least in the short run."

"[...] Ultimately, we will raise rates to levels that bring inflation back down to our medium-term target in a timely manner."

But the main thrust of Lagarde's speech was on the succession of economic shocks that had hit economies around the world and the "new global map" of economic relationships that was forming as a result.

"And in this environment, it is uncertain whether a seamless expansion of supply will continue and how global demand will be affected," Lagarde explained.

Among those shocks were supply chain disruptions, Covid-zero policies and the invasion of Ukraine.

The latter was impacting on the abundant energy that had existed during the past two decades, she said.

Lagarde also said that the ECB would continue to reinvest the proceeds from its pandemic emergency purchase programme going forwards and that its new Transmission Protection Instrument would remain in place.