A senior European Central Bank official said on Wednesday that efforts to bring down inflation will require time and that the eurozone has yet to fully experience the effects of higher interest rates. “While inflation continues to decline, it is still expected to remain high for an extended period,” stated ECB vice-president Luis de Guindos at a conference in Cyprus.
As part of its ongoing attempt to cool consumer prices, the ECB raised interest rates for the tenth time last month, resulting in a record high benchmark deposit rate of four percent.
In September, eurozone inflation declined to 4.3 percent, reaching its lowest level in nearly two years and sparking hopes that the ECB’s aggressive hiking cycle may be coming to an end.
READ: Europe inflation held steady in August as ECB keeps an open mind on rates
De Guindos emphasized that the next steps taken by the bank will depend on data and explained that the impact of the ECB’s monetary policy tightening is still being felt in the real economy. He stated, “A significant portion of the transmission from financing conditions to the real economy is still expected to be in progress.” De Guindos also noted a slowdown in real estate activity due to the increasing cost of credit, but added that the full impact of tightening measures will likely be seen throughout the current year and beyond.
READ: ECB raises rates to record high, signals end to hikes
The ECB has stated that its key interest rates have now reached levels that, if maintained for a sufficient length of time, will contribute significantly to bringing inflation back to its target of two percent. The bank projects that inflation will reach 5.6 percent this year before decreasing to 3.2 percent in 2024 and 2.1 percent in 2025, partially due to lower energy prices.
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