(Bloomberg) -- A large portion of the European Central Bank’s unprecedented campaign of interest-rate hikes has yet to be felt in the economy and will only filter through this year and beyond, according to Vice President Luis de Guindos.

While transmission of monetary-policy tightening to financing conditions is “well underway,” its passage to the real economy is proceeding at a slower pace, with a “substantial share” still in the pipeline, Guindos told an event in Limassol, Cyprus.

“For the economy as a whole, model-based estimates continue to suggest that, owing to the typical lags in monetary transmission, the bulk of the impact of our tightening is expected to materialize only in the course of this year and thereafter,” he said Wednesday.

The remarks reinforce the idea that the ECB’s deposit rate may not be raised beyond the 4% level it’s currently at, though ECB officials insist borrowing costs must remain elevated for an extended period to ensure inflation is headed back to the 2% target.

Portuguese central-bank chief Mario Centeno also said earlier Wednesday that the ECB’s rate increase have yet to be fully felt in financing conditions, and that borrowing costs probably won’t have to rise further. 

“It can be expected that the cycle of interest-rate rises has been, for now and with the present economic conditions, concluded,” he told reporters in Lisbon. “These interest rates are compatible with bringing down inflation to the medium-term objective.” 

The outlook for the 20-nation economy has soured recently, with barely any growth expected in the second half of this year. Inflation slowed to 4.3% last month, while the closely watched core measure that strips out energy and food eased to a one-year low of 4.5%.  

“Underlying price pressures remain strong, although most measures of inflation have started to ease thanks to aggregate demand and supply becoming more aligned and lower energy prices in recent months being passed on to other parts of the economy,” Guindos said.

Also speaking Wednesday, ECB President Christine Lagarde reiterated that borrowing costs will be set at “sufficiently restrictive levels for as long as necessary.”

--With assistance from Joao Lima and Henrique Almeida.

(Updates with Centeno, Lagarde starting in fifth paragraph.)

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