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(Kitco News) - The European Central Bank will remain committed to bringing inflation down to its 2% target, which means it is not done raising interest rates yet, according to the latest comments from ECB President Christine Lagarde.
Lagarde noted that the ECB has made solid progress as it has aggressively raised interest in the last nine months, but she added inflation remains a threat.
"We are not pausing; that is very clear. We have more ground to cover… based on the data we have received," she said. "The council is determined to fight inflation, tame inflation and bring it down to the 2% target."
The hawkish comments come after the ECB raised interest rates by another 25 basis points, pushing the main refinancing operations, marginal lending facility and the deposit facility rising to 3.75%, 4.00% and 3.25%, respectively.
Regarding how high the ECB will take rates, Lagarde said she doesn't have a "magic number that is restrictive enough."
"We will know that number when we get there. Is monetary policy restrictive? Yes. Is it sufficiently restrictive? Not yet," she said.
Currently, markets are pricing in the potential for two more 25 basis points rate hikes.
Although the ECB is looking to raise interest rates, Lagarde said there are persistent risks to eurozone economic activity.
"Renewed financial market tensions, if persistent, would pose a downside risk to the outlook for growth as they could tighten broader credit conditions more strongly than expected and dampen confidence," she said in her prepared remarks.
Looking at gold prices, some analysts don't expect the ECB's hawkish stance to have much impact on the market.
Thorsten Polleit, chief economist at Degussa, said the central bank's commitment to fighting inflation is waning as economic risks grow.
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He added that he expects the ECB is reaching the end of its tightening cycle.
"Our assessment is that the economic circumstances in the eurozone in the coming months will greatly reduce the likelihood of further rate hikes; there is probably only a chance (if at all) for a small further rate hike in June," he said. "In view of the increasing risks in the economic and financial system, but of course also for the purchasing power of the euro, holding physical gold and silver continues to be attractive."
In the broader gold space, analysts note that the ECB's hawkish outlook should continue to support the euro against the U.S. dollar, which in turn should be positive for gold prices.
Wednesday, the Federal Reserve moved into a more neutral position after raising interest rates by 25 basis points.
"If you add up all the tightening that's going on through various channels, we feel like we are getting closer, or maybe even there," said Jerome Powell, Chair of the Federal Reserve, Wednesday. "We've moved a long way fairly quickly. And we can afford to look at the data and make a careful assessment."
