Christine Lagarde has indicated a recession in the eurozone would not be enough to stop the European Central Bank raising rates further, underlining policymakers’ determination to quash inflation despite the risks to growth.
Lagarde said in Latvia on Thursday that a “mild recession” in the eurozone would not be enough to “tame inflation” on its own. A recession was not yet her baseline scenario for the 19-country single currency bloc, but if it happened it would not be sufficient for the ECB to “just let it roll out” to bring inflation down to its 2 per cent target.
The hawkish comments by the ECB president follow remarks after the central bank’s policy vote last week, which investors initially interpreted as a signal that policymakers could soon stop raising rates due to growing recession fears.