Christine Lagarde, European Central Bank chair will comment on EBC 25 bp rate hike to 3,75% and situation in EMU economy. As for now Lagarde stance is hawkish, remind that central bank is highly determined to cool inflation but in the same time pause is still possible. EURUSD is falling below 1,1030 level. Here are the highlights from press conference:
- Future ECB decisions will depend on macro data
- Labor market remains strong
- Higher interest rates may lead to below trend growth era
- Inflation will remain at elevated levels for an extended period of time (core inflation)
- A decline in external demand negatively affects the manufacturing
- High margins and wage growth are the main parameters driving up inflation dynamics
- The inflation outlook remains highly uncertain
- Unfavorable wheather conditions may lift food prices to higher than expected levels
- Also geopolitics may lead to higher food inflation
- Inflation is falling but it's still too high for too long
- Lagarde confirms hawkish stance for 'as long as it will be needed' - interest rates have to rise to restrictive level
- ECB has enough determination to fight with inflation - unchanged target is 2%
- The economy is expected to remain weak in the short term. Over time, falling inflation, rising incomes and improving supply conditions should support a recovery
- Large repayments of TLTRO operations in June went through smoothly
- The decision to hike was unequivocal
- The ECB is currently reluctant to give unanimous forecasts for future decisions
- ECB did not discuss cutting the bank's balance sheet total
- ECB may pause rate hike (also to hike rates further) but cutting rates is not possible and should not be even discussed
- Wage increases is driving inflation, but also profit margins (slight decline in 1Q 2023)
- We are not seeing inflation 'second round effect' and not expect it but we are careful about services inflation
- Interest rates, not QT changes are the main tool for ECB policy
- Doing too much is not considered by ECB but the focus is on inflation - if it's too high, ECB will react
- Markets sees chances slightly below 40% for 25 bp ECB rate hike in September
- The ECB will no longer pay interest on minimum reserves
Source xStation5
