Inflation to remain 'undesirably high' for some time, says ECB chief

By Aysu Bicer

ANKARA (AA) - Eurozone inflation will remain "undesirably high" for some time, owing to continued pressure from energy and food prices, European Central Bank (ECB) chief Christine Lagarde said on Thursday.

The bank hiked rates for the first time in over a decade after the eurozone inflation hit its highest level on record.

It decided to raise the three key rates larger than expected by 50 basis points as the euro area annual inflation spiked to 8.6% in June, far above the ECB’s 2% inflation target.

"Economic activity is slowing. Russia’s unjustified aggression towards Ukraine is an ongoing drag on growth," said Lagarde in a news conference following the monetary policy meeting.

She said the impact of high inflation on purchasing power, continuous supply constraints, and higher uncertainty are having a dampening effect on the economy.

Firms continue to face higher costs and disruptions in their supply chains, she warned. "Although there are tentative signs that some of the supply bottlenecks are easing, taken together, these factors are significantly clouding the outlook for the second half of 2022 and beyond."

The war may also further dampen confidence and aggravate supply-side constraints, while energy and food costs could remain persistently higher than expected, she underlined. "Faster deceleration in global growth would also pose a risk to the euro area outlook."