MEPs quiz ECB President focusing on interest rate hikes

On Monday MEPs quizzed European Central Bank President Christine Lagarde, focusing mainly on inflation and the interest rate hikes.

During her quarterly appearance in front of the European Parliament's Economic and Monetary Affairs committee, Ms Lagarde faced repeated questioning, primarily from MEPs on the left of the political spectrum, about the European Central Bank's (ECB) interest rate hikes. They argued that the inflation at hand was a supply based one and therefore should not be tackled by raising interest rates. The interest rate hikes were harming working families and economic growth for no good reason, these MEPs argued. While acknowledging that a component of inflation was supply based, Ms Lagarde defended the high interest rates policy arguing that it was necessary to stay on the course taken and that the there was currently no discussion in the ECB about reducing rates. It was important to anchor investment expectations to bring back investor confidence, Ms Lagarde added.

MEPs also asked various questions concerning the review of the EU's economic governance rules, on which work between the co-legislators should begin soon. Ms Lagarde said that she hoped that a deal on the new rules would be reached by the end of the year.

Some MEPs questioned Ms Lagarde on the roll out of a digital euro and how to deal with the excess liquidity currently held by the EU's banks.

During her opening statement to the MEPs, Ms Lagarde outlined the economic outlook, including inflation expectations for the Euroarea, went over the recent key ECB decisions, outlining that rates will be set at sufficiently restrictive levels for as long as necessary, and explained the work being done by the ECB to address the excess liquidity in the system.

You can watch the hearing again here.