Christine Lagarde announced a new increase in interest rates

The head of the European Central Bank, Christine Lagardesaid interest rates may need to rise further, to a growth-shrinking level, to reduce inflation that has soared five times above target.

Lagarde said on Friday that the “risk of a recession” had increased but that a recession alone would not be enough to tame rising prices.

“But we also need to normalize our other policy tools and thus strengthen the impetus from our interest rate policy,” he added.

“We expect an increase in interest rates, and the withdrawal of support may not be enough,” Lagarde also said.

“Ultimately, we will raise interest rates to levels that bring inflation back to our medium-term objective in time.”

The ECB has raised interest rates by 200 basis points since July in a bid to tame inflation. Having already embarked on the most aggressive monetary tightening in its history, the ECB is expected to raise interest rates to 2% or more next month (from 1.5% now).

“Interest rates are, and will remain, the main tool for adjusting our policy stance,” he said. “Recognizing that interest rates remain the most effective tool for shaping our policy stance, it is appropriate for the balance sheet to normalize in a measured and predictable manner.”

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