ECB President Christine Lagarde told a parliamentary committee, interest rates will remain the “main tool for fighting inflation”. Meanwhile, in December, ECB will “lay out the key principles for reducing the bond holdings”. The balance sheet will be “normalized over time in a measured and predictable way.”

“While monetary policy is geared towards bringing inflation back to our medium-term target, the economic outlook will also depend on the actions taken by other stakeholders,” she said. “In the current environment of high inflation, fiscal policy needs to be considerate to not add to inflationary pressures. Fiscal support should therefore be targeted, tailored and temporary.

Lagarde also reiterated that “meeting-by meeting approach” and data dependence of upcoming policy decisions. “How much further we need to go, and how fast we need to get there, will be based on our updated outlook, the persistence of the shocks, the reaction of wages and inflation expectations, and on our assessment of the transmission of our policy stance,” she added.

Full remarks here.

ECB Governing Council member Klaas Knot said, “My worry is still inflation, inflation, inflation… As long as the risks to our inflation outlook are so clearly tilted to the upside, I think the risk of us doing too little is clearly more pronounced than us doing too much… We should not give up too early and not cry victory too early.”

Knot also said a recession is “not a foregone conclusion”. “If you look at Germany, where actually the economy is doing better than then was feared, it’s not a foregone conclusion that we will get a recession”, he said. “We will get weaker growth, that’s for sure. But we also need weaker growth to bring inflation back to target.”

In the accounts of ECB’s October 26-27 meeting, it’s noted that the 75bps rate hike was “supported by a very large majority of members” with “a few members expressed a preference” for just 50bps.

Still, with a 75bps hike, it was also “clear that rates would need to be raised further to reach a level that would deliver on the ECB’s 2% medium-term target”. In light of “prevailing uncertainties”, there was broad support for a “meeting-by-meeting, data-dependent approach” to taking monetary policy decisions.

Full meeting accounts here.

ECB Vice-President Luis de Guindos said at a finance event, “we will continue to raise interest rates to a level that allows us to ensure that inflation converges towards our definition of price stability.”

“It is very important to look at the evolution of underlying inflation and possible second round effects because they will determine the response of monetary policy,” De Guindos said.

While he expect inflation to slow in Q1 or H1 of next year, “we also believe core inflation will be high in coming months.” Also, he noted, “it is very possible that in the fourth quarter and the first quarter of next year we will have negative growth rates.”