ECB: Lagarde no longer dismisses a 2022 rate hike but hurdles remain high

In Short

Holding course for the time being: As expected, at today’s meeting the Governing Council (GC) did not act and just “confirmed the decisions taken at its monetary policy meeting last December”. However, the ECB finds itself between a rock and a hard place.
Market CommentaryCommentaries & InterviewsMarket Commentaries

Highlights:

  • As expected, at today’s meeting the Governing Council (GC) did not act and just “confirmed the decisions taken at its monetary policy meeting last December”.
  • That said, while still defending the transitory inflation view the headache on the back of upside inflation surprises is getting stronger and the policy statement acknowledged that inflation risks are “tilted to the upside”.
  • President Lagarde made clear that the March meeting will be pivotal. She refused to reiterate that a 2022 rate hike was “very unlikely” and rather stated that this was contingent on the projection. But she also emphasized that
    QE would be terminated before lifting rates and that the criteria for hiking rates still need to be fulfilled.
  • We see a first rate hike in 2023. However, the risk that the GC might be forced into a faster reduction of QE purchases and hike rates in 2022 increased significantly.

Download the full publication below

ECB: Lagarde no longer dismisses a 2022 rate hike but hurdles remain high
Picture

Generali Investments, all rights reserved. This website is provided by Generali Investments and is considered as a marketing communication and financial promotion related to the products and services of the following companies belonging to the Generali group: Generali Investments Partners S.p.A. Società di gestione del risparmio, Generali Insurance Asset Management S.p.A. Società di gestione del risparmio, Generali Investments Luxembourg S.A. and Generali Investments Holding S.p.A. (hereinafter jointly, Generali Investments).