Addressing the European Parliament's Committee on Economic and Monetary Affairs (ECON) on Monday, the European Central Bank's president Christine Lagarde said that the ECB is committed to bringing down inflation in the Eurozone to its medium-term target of 2%, while interest rates will remain its main tool for that.
She also noted how much further rates need to go, and how fast, will be based on the ECB's updated outlook, the persistence of the shocks, the reaction of wages and inflation expectations, and the assessment of transmission.
Also, Lagarde said that the key principles for reducing the bond holdings in the ECB's asset purchase program portfolio will be laid out in December. "It is appropriate that the balance sheet is normalized over time in a measured and predictable way," she added.
The ECB's chief noted that incoming data suggests that wages are picking up, so the policymakers will continue to assess their implications. "Rate adjustments will take some time to be felt in the economy," she said. Meanwhile, she added the growth is expected to continue weakening for the remainder of this year and the beginning of next year.
Regarding fiscal policy, Lagarde said that it needs to be considerate and to not add to inflationary pressures.