By Scott Kanowsky
Investing.com -- The European Central Bank's future interest rate path - including how far and how fast it hikes borrowing costs - will be dependent on inflation expectations, according to ECB President Christine Lagarde.
Speaking at a conference in Frankfurt, Lagarde said that ECB will need to raise rates "further," suggesting that it will unveil an increase at its fourth straight meeting in December in a bid to bring prices back down to its medium-term target of 2%. Since July, the ECB has ratcheted up rates by 200 basis points.
"Interest rates are, and will remain, the main tool for adjusting our policy stance," Lagarde said. "But we also need to normalise our other policy tools and so reinforce the impulse from our rate policy."
However, she warned that rates may need to hit levels that restrict economic activity, adding that the risk of recession has increased.
Lagarde also said that it is "appropriate" for large-scale asset purchases, which the ECB utilized to help support the Eurozone economy during the COVID-19 pandemic, to be rolled back in a "measured and predictable way."
Lagarde said the ECB will lay out the key principles for reducing its bond holdings next month.
The euro was trading slightly higher against the U.S. dollar on Friday.