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ECB's Lagarde: Future Rate Hikes Open  03/22 06:04

   European Central Bank President Christine Lagarde said future interest rate 
decisions are open after upheaval in the global banking system left the 
economic outlook "blurrier" than just a few weeks ago.

   FRANKFURT, Germany (AP) -- European Central Bank President Christine Lagarde 
said future interest rate decisions are open after upheaval in the global 
banking system left the economic outlook "blurrier" than just a few weeks ago.

   Whether to keep hiking rates would depend on incoming data, above all 
whether the bank could see signs that painfully high inflation is headed 
convincingly down, she said during a conference Wednesday at Frankfurt's Goethe 
University.

   "With high uncertainty, it is even more important that the rate path is data 
dependent," she said. That means "we are neither committed to raise further nor 
are we finished with hiking rates."

   She said "the recent financial market tensions " have "added new downside 
risks and have made the risk assessment blurrier."

   The open-ended approach is a shift from the ECB's earlier stance of clearly 
indicating that more rate hikes were in the offing as it underlined its 
determination to reduce inflation.

   But the failure of Silicon Valley Bank in the U.S. has sent shudders through 
financial markets due to fears that other banks may suffer losses as central 
banks in the U.S., Britain and Europe rapidly increase interest rates to battle 
inflation.

   Investor worries about banks were intensified by troubles at Swiss bank 
Credit Suisse, which was rescued through a takeover by rival UBS. Troubles at 
Credit Suisse long predated the increases in interest rates, however.

   The ECB raised rates by a larger-than-usual half-percentage point Thursday 
after all but promising the move in January. It's targeting consumer prices 
that rose 8.5% last month from a year earlier in the 20 countries that use the 
euro currency.

   Higher rates cool off inflation by making borrowing more expensive for new 
purchases or expanding a business, reducing demand for goods. But with the 
banking turmoil, commercial banks may become more hesitant to risk lending, 
which could restrict credit more than central banks might have intended.

   The U.S. Federal Reserve is facing a similar conundrum Wednesday. Before the 
bank woes, the Fed was expected to raise rates by a quarter- or even half-point.

   In Europe, Lagarde made clear that she sees "no tradeoff" between fighting 
inflation and supporting stability in the banking system. She says the ECB has 
separate tools for each issue: interest rates to combat price spikes and 
lending support to banks in case of risks.

   Europe's economic prospects brightened slightly after making it through the 
winter without running out of natural gas after Russia cut off most supply to 
the continent amid the war in Ukraine.

   The German Council of Economic Experts on Wednesday raised its outlook for 
the eurozone's largest economy to 0.2% growth from 0.2% contraction in its 
previous outlook in November.