President Lagarde of the ECB has communicated that the ECB still needs to continue with the interest rate hike cycle. The ECB is not yet satisfied with the inflation outlook. The rate of price growth in the economy is expected to remain elevated for an extended period of time. At this point, there is no confirmation yet that inflation has peaked, Lagarde added at Sparkassentag.
However, rate hikes are already feeding into lending conditions - said Lagarde.
The message somewhat disrupts the earlier reaction to the prediction of an ECB hike cycle immediately after the EMU CPI reading. The message is hawkish. Despite the decline in eurozone inflation, the ECB is clearly signalling that this is not the end in terms of hikes.
EURUSD extends gains after Lagarde's announcement. Source: xStation 5
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