Europe's central banker: Not adding to pinch with rate hike

The head of the European Central Bank is doubling down on the message that it's no time to raise interest rates

FRANKFURT, Germany -- The head of the European Central Bank warned that high oil and gas prices are hitting consumers in the 19 countries that use the euro harder than in other major economies and underlined that the bank won't add to the squeeze by raising interest rates anytime soon.

Christine Lagarde's message that it's “highly unlikely” the bank will increase borrowing rates from record lows next year comes as other central banks around the world, including the U.S. Federal Reserve, are beginning to withdraw extraordinary stimulus measures that propped up their economies during the coronavirus pandemic.

The European Central Bank sees higher consumer prices as stemming from transitory factors that “are likely to fade” in coming months, Lagarde said in the text of a speech delivered at the Frankfurt European Banking Congress. Those include high oil and gas prices and shortages of raw materials and parts as businesses struggle to meet stronger demand for goods.

“We must not rush into a premature tightening when faced with passing or supply-driven inflation shocks,” Lagarde said.