The interest rate increases of the European Central Bank they are just beginning to affect the economybut their impact may become stronger as a result of the banking turmoil, ECB President Christine Lagarde said today.

Investors are wondering whether the ECB will be able to continue to raise interest rates to combat high inflation despite the turmoil in the banking sector that manifested itself with the bankruptcy of two American banks and the last-minute bailout of Credit Suisse.

The ECB’s moves, Lagarde saidto raise interest rates may have a greater effect, if banks become more cautious about taking risks and start asking higher interest rates for the loans they makewhich likely implies that the ECB will need to raise interest rates less.

“If, for example, banks start applying a higher ‘intermediation spread’ – meaning that for each level of prime rates they ask for more compensation for the risk they take on lending – then the transmission will be stronger,” he said. .

Lagarde reaffirms ECB’s determination to reduce Eurozone inflation to 2% from 8.5% in February.

“The public can be sure of one thing: We will achieve price stability and the return of inflation to 2% in the medium term is non-negotiable” he stressed and added:

“To reduce inflationary pressures, it is important that our monetary policy moves strongly in a tighter direction… And that process is just beginning to materialize.”

The ECB increased the key deposit acceptance rate by 350 basis points (3.5 percentage points) to 3% since last July, while markets expect it to reach 3.5% this year.