What isn’t as well-known are the experiences that led her to that conclusion, which she describes in her autobiography.
In Chapter 31, she tells of a time that she was harassed by a demon:
“Out of his body there seemed to be coming a great flame, which was intensely bright and cast no shadow. He told me in a horrible way that I had indeed escaped out of his hands but he would get hold of me still.”
Frightened, she tried to shoo him away with the Sign of the Cross. The demon left her, but soon returned. This happened several times, until she noticed she had some holy water nearby. “So I flung some in the direction of the apparition,” she wrote, “and it never came back.”
Another time, she wrote, “the devil was with me for five hours, torturing me with such terrible pains and both inward and outward disquiet that I do not believe I could have endured them any longer. The sisters who were with me were frightened to death and had no more idea of what to do for me than I had of how to help myself.” She only found relief after she requested holy water and threw some to the place where she saw a demon nearby.
It’s in her explanation of all of this that the famous quote comes in.
“From long experience I have learned that there is nothing like holy water to put devils to flight and prevent them from coming back again. They also flee from the Cross, but return; so holy water must have great virtue.”
She continues: “For my own part, whenever I take it, my soul feels a particular and most notable consolation. In fact, it is quite usual for me to be conscious of a refreshment which I cannot possibly describe, resembling an inward joy which comforts my whole soul.
“This is not fancy, or something which has happened to me only once: it has happened again and again and I have observed it most attentively. It is, let us say, as if someone very hot and thirsty were to drink from a jug of cold water: he would feel the refreshment throughout his body. I often reflect on the great importance of everything ordained by the Church and it makes me very happy to find that those words of the Church are so powerful that they impart their power to the water and make it so very different from water which has not been blessed.”
She goes on to share many other stories of the power of holy water in the rest of the chapter, which you can read here.