Powell, Lagarde, Bailey and Ueda speak in Sintra

2:50 PM 28 June 2023

Monetary policy panel at ECB central banking forum in Sintra, Portugal began at 3:40 pm BST. Event was watched closely as it was attended by heads of European Central Bank, Bank of England, Federal Reserve and Bank of Japan. Key comments:

ECB President Lagarde

  • We still have ground to cover

  • If the baseline stands, we'll likely hike in July

  • We will decide meeting by meeting

  • We will have a lot more information in September

  • I am not considering rate pause at the moment

  • Manufacturing does not give a great hope for a strong recovery

  • Transmission of policy likely to be less rapid than in the past due to fixed rate mortgages

  • I may have underestimated the resilience of the economy

BoE Governor Bailey

  • Economy turned out to be much more resilient

  • Data showed clear signs of persistence of inflation

  • We will do what's needed to meet the inflation target

  • Headline inflation is to come down markedly in 2023

  • Core inflation in the UK is much stickier

  • I am interested that markets are expecting short-lived rates peak

  • Balance sheet reduction has gone very smoothly so far

Fed Chair Powell

  • Fed sees more tightening power coming through

  • We believe there is more restriction coming, driven by labor market

  • Strong majority is for two more rate hikes in the dot plot

  • Policy may not be restrictive enough and may not be restrictive for long enough

  • I wouldn't take moving at consecutive meetings off the table

  • There is significant disinflation in the pipeline from rents but will take time

  • I haven't seen progress in non-housing services inflation

  • We need to see more softening in the labour market

  • Softening is slower than expected

  • There is a significant probability of a downturn but it is not the most likely case

  • It is appropriate to slow pace of Fed's moves

  • Response rates to data have dropped and are more volatile

  • Commercial real estate is not one of reasons for June hold

  • We are not nearly done at the moment

  • It is going to take some time to get inflation to the goal

  • I don't see anything that would make us want to adjust speed of balance sheet adjustment right now

  • Underlying pace of QT is about $1 trillion per year

  • I don't see us getting back to 2% this year or the next, I see us making progress

  • I see us getting to 2% core inflation by 2025

BoJ Governor Ueda

  • Underlying inflation is below target

  • Wage inflation consistent with inflation target is well above 2%

  • If we become reasonably sure about second part of inflation forecast that would be good reason for reconsidering policy change

  • Economy is going to expand slightly above potential for some time

  • We are seeing signs of inflation expectations rising but not fully in line with target

  • China-US tensions may bring supply-chain inefficiencies

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