FRANKFURT (Reuters) -Euro zone inflation has not peaked and it risks turning out even higher than currently expected, European Central Bank President Christine Lagarde said on Monday, hinting at a series of interest rate hikes ahead.

Her comments, along with remarks by Dutch central bank chief Klaas Knot earlier, were likely to dampen speculation that the ECB was about to take a gentler path with future rate increases.

Inflation in the euro zone hit a record 10.6% on an annualised basis last month, but economists polled by Reuters expect it to edge down to 10.4% in a flash reading for November due to be published this week.

Contrary to some investors and even her own deputy, Luis de Guindos, Lagarde pushed back on expectations the high watermark for price growth had been reached.

“We do not see the components or the direction that would lead me to believe that we’ve reached peak inflation and that it’s going to decline in short order,” Lagarde told the European Parliament.

She added that ECB economists still saw clear “upside” risks – financial jargon for the risk that inflation readings could come in higher than expected.

Economists polled by Reuters see euro zone inflation at 8.5% this year, 6.0% next year and 2.3% in 2024 before finally hitting the ECB’s 2% target in 2025.

The ECB has increased its rate on bank deposits by a record 200 basis points to 1.5% in three months to dampen demand in a bid to lower price growth.

The ECB’s top economic thinkers, Isabel Schnabel and Philip Lane, are now sparring over the outlook for inflation and interest rates, leaving investors scratching their heads over the ECB’s next policy moves.

Markets have been swinging back and forth about whether the ECB will raise its policy rates by 50 or 75 basis points at its next meeting on Dec. 15 and about the level at which borrowing costs will peak, which they generally see around 3%.

Lagarde, who praised the debate between Lane and Schnabel, said both questions depended on a number of variables including wages and inflation expectations.

But she added she thought there was “a way to go” with further rate hikes – a phrase also used by Federal Reserve Chair Jerome Powell.

“We clearly have to continue increasing interest rates … and my suspicion, although I do not want to venture too much into the future, is that we still have a way to go,” she said.

‘NOT IN LINE’

The Dutch central bank’s Knot was more explicit in his remarks, saying worries about “overtightening,” which were expressed by ECB board member Fabio Panetta in recent weeks, were a “a joke”.

“We are still in the process of merely removing accommodation, removing stimulus, so then to already talk about the risk of overtightening is a bit of a joke,” he told a conference.

Knot also urged caution about the ECB’s expectations for a rapid decline in inflation over the next several years and about the prospect of an imminent recession while warning about the risk of wages driving up prices.

“If you look at the most recent wage deals, they’re clearly not in line with sort of having a 1% productivity growth plus a 2% inflation target,” Knot said.

(Reporting by Balazs Koranyi, Editing by William Maclean, Gareth Jones and Paul Simao)

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