Europe's Central Bank Signals Higher Interest Rates Are Coming

Reuters: ECB may have to restrict growth to control inflation, Lagarde says 

* At 1.5%, the ECB’s deposit rate is not far from the so-called neutral rate, where the bank is neither stimulating nor holding back growth. 

* Most estimates of the neutral rate are between 1.5% and 2%, suggesting that after an expected December hike “accommodation” will have been removed. 

The European Central Bank will keep raising interest rates and may even need to restrict economic activity to tame inflation, ECB President Christine Lagarde said on Friday, singling out rates as the bank’s key instrument over balance sheet reduction. 

The ECB has raised rates by an unprecedented 200 basis points since July to tackle inflation, and said that more policy tightening is coming via rate hikes and the reduction of its 5 trillion euro ($5.2 trillion) debt holding.  

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Update #1: ECB must raise rates decisively; let bonds expire from start of 2023, Nagel says (Reuters)  

Update #2: Lagarde Says Rates to Rise More, May Need to Become Restrictive (Bloomberg)  

WNU Editor: The EU inflation rate is now over 10%. Interest rates will need to approach that level if the EU does not want to implode their currency and face even higher inflation numbers.