By Scott Kanowsky
Investing.com -- European Central Bank President Christine Lagarde pledged to work to rein in soaring inflation in a closely-watched press conference in Amsterdam on Thursday.
Lagarde's comments come after the ECB announced plans to halt its massive bond-buying program and increase interest rates by 25 basis points in July, as it looks to bring prices back down to the central bank's 2% target.
The ECB also committed to a further rate rise at its September meeting. Lagarde did not specify the size of that move, saying instead that that increase will depend on changes to the ECB's inflation outlook.
"If the medium-term inflation outlook persists or deteriorates, a larger increment will be appropriate at our September meeting," Lagarde said. "So [...] if you are at 2.1% in 2024 or beyond then the increment adjustment will be higher, the answer is yes."
Beyond September, the central bank added that it anticipates a "gradual but sustained path" of rate increases, depending on incoming data.
The ECB also raised its euro area inflation projection in 2022 to 6.8% from 5.1%, with energy prices expected to stay higher for longer due to the conflict in Ukraine. Inflation is then seen dropping to 3.5% in 2023 and 2.1% in 2024. Forecasts for annual real GDP growth were also cut to 2.8% for 2022 and 2.1% over the following two years.
The EUR/USD rose initially after the ECB's announcement, but fell after Lagarde's speech, trading at $1.0691 at 0928 EST (1327 GMT). Meanwhile, the yields on benchmark Italy 10-Year and Germany 10-Year bonds jumped, touching their highest levels in eight years.