The European Central Bank President has pushed back against market bets that runaway inflation would force a rate hike as early as next year, reaffirming the view that price pressures would ease by then.
With central banks elsewhere indicating they are heading down a path to tighter policy, Christine Lagarde said the ECB Governing Council had done much "soul-searching" over its stance but concluded it was correct.
The topic had dominated the policy discussion, she told a news conference: "We talked about inflation, inflation, inflation."
Lagarde identified higher energy prices, a global mismatch between recovering demand and supply, and one-off base effects such as the end of a cut in German sales taxes, as the three main factors temporarily driving euro zone inflation.
"While inflation will take longer to decline than previously expected, we expect these factors to ease in the course of next year. We continue to see inflation in the medium term below our 2% target," she said.
Lagarde referred to ECB policy guidance stipulating interest rates will not rise until inflation is seen heading back to target by the middle of the forecast period and due to hold there.
"Clearly under the current analysis (those conditions) are not satisfied and certainly not in the near future," she added
The ECB has long argued the current spike in prices is fleeting and that underlying inflation pressures are weak enough to require its support for years to come.
But household inflation expectations are now rising quickly and investors are also doubting that view, pricing in a rate hike by the end of next year and opening a big gap between the ECB's own guidance and market expectations.
Adding pressure, German consumer prices rose a more-than-expected 4.6% in October, data showed today, reflecting growing price pressures in Europe's largest economy.
The phenomenon is global, however, and central banks around the world are already reacting.
The Bank of Canada was the latest to do so, when it indicated this week it could hike interest rates as soon as April 2022 and said inflation would stay above target through much of next year.
The US Federal Reserve and the Bank of England have also signalled policy tightening while several smaller banks, from Norway to South Korea, have already hiked rates.
Beyond the inflation commentary, the ECB kept policy unchanged as widely expected before a crucial December decision on whether to end emergency stimulus and return policy to a more normal setting. It reaffirmed its plan to keep buying bonds to pin borrowing costs near record lows.
The ECB is likely to remain an outlier. Come December, it is likely to decide to end emergency stimulus but will probably ramp up another support scheme to pick up the slack and keep borrowing costs down.
With today's decision, the ECB will continue buying bonds at a pace "moderately" slower than in the preceding two quarters and will keep its benchmark rate at -0.5%.