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Lagarde Delivers Unsettling News to Mortgage Holders: High Rates to Persist “As Long as Necessary

The ECB President asserts that “the battle against inflation is not yet won.” The Cost of Mortgage Renegotiation Amidst the Escalation of the Euribor. European Central Bank President, Christine Lagarde.OLIVIER HOSLET / EFE Christine Lagarde, the President of the European Central Bank (ECB), has emphasized that the tightening of monetary policy is making headway, while cautioning that “the battle against inflation is not yet won.”

In the current environment, for the ECB, this translates to maintaining interest rates at sufficiently restrictive levels “for as long as necessary” to achieve a timely return of inflation to the medium-term target of 2%, she emphasized in a speech delivered at the forum organized by the Federal Reserve of Kansas City in Jackson Hole.

In this context, the French economist has indicated the possibility that we might be entering an era of shifts in economic relations, which poses a significant challenge for monetary authorities with a mandate for stability.

Mortgage Loan Gonzalo Bernardos’ Warning About the Mistake Many Spaniards Are Making by Rushing Their Mortgage Given that central bank policies operate with delays, Lagarde points out that waiting for parameters of the new environment to become completely clear before taking action is not feasible, although the effects of decisions made will only be truly comprehended after implementation.

Expectations In such a scenario, Lagarde emphasizes the importance of clarity in establishing the appropriate role of monetary policy, assuming that price stability is a fundamental pillar of an investment-friendly environment. Therefore, “monetary policy should not become a source of uncertainty in itself.”

According to her, this will be crucial to firmly anchor inflation expectations even when there are temporary deviations from the target. She defends the significance of maintaining public confidence that, even in a new environment, the goal remains in sight. “We must and will keep inflation at 2% in the medium term,” she assures.

“There is no pre-existing playbook for the situation we face today, so our task is to craft a new one,” Lagarde affirms.

Consequently, for Lagarde, policy formulation in an era of change and disruptions requires an open mind and willingness to adjust analytical frameworks in real time to new developments, while central banks provide an anchor for the economy and ensure price stability in accordance with their respective mandates. “And looking ahead, we must remain clear in our objectives, flexible in our analysis, and humble in our communication,” she concludes.