European Central Bank chief hints at interest rate peak in eurozone but denies mulling cuts

OVIEDO, Spain

European Central Bank (ECB) President Christine Lagarde repeated on Friday that the bank is not considering interest rate cuts but hinted that rates may have peaked.

“We consider that the key ECB rates have reached levels that, maintained for a sufficiently long sustained duration, will substantially contribute to the timely return of inflation to our target," she said.

Meanwhile, she emphasized that the ECB has not “decided, discussed or even pronounced cuts.”

Thursday’s interest rate hike came as a surprise to some economists, who saw higher interest rates damaging an already weakening eurozone economy.

Earlier this week, the European Commission forecast that next year’s growth would be lower than expected as Germany continues in a prolonged recession.

Lagarde added that no member state at Friday’s eurozone finance and economic minister’s meeting questioned the ECB’s decision to hike rates.

In August, the eurozone inflation rate came in at 5.3%, still significantly higher than the bank’s 2% target. Lagarde said that interest rates are “the key tool” to fight inflation.

“Our fight against inflation is ongoing and we will set interest rates at sufficiently a restrictive level as long as is needed to reach the target,” she said.

European economic ministers on Friday gathered in Spain for two days to discuss boosting investment and fiscal policy.

Before Friday’s meeting began, Spain’s acting Economic Minister Nadia Calvino told the media that she was very interested in Lagarde’s explanations about the interest rate hikes.

“I imagine they will also confirm that this is the end of the very rapid interest rate hikes that we’ve experienced over the past year,” she added.

The ECB’s deposit rate now sits at 4%, the highest level since the euro was launched in 1999.