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| ECB President Lagarde Reiterates Commitment to Tackling Inflation While Navigating Uncertainty |
ECB President Christine Lagarde has stated that the Eurozone's underlying inflation dynamics remain strong and that the bank is committed to bringing inflation down to target. However, she also emphasized that the current times are very uncertain and that inflation is still high, with uncertainty around its path ahead increasing. Lagarde stated that the bank is neither committed to raising rates further nor finished with hiking them. She further highlighted that if banks start to apply a larger intermediation wedge, then transmission will be stronger.
The greater role played by sectors that rely on discounted future earnings, such as tech, could make monetary transmission more powerful, said Lagarde. She added that the bank does not see clear evidence that underlying inflation is trending downwards and that excess savings and the low pass-through to deposit rates could mean a weaker pass-through to consumption. Lagarde warned that we could see a more prolonged cost-push shock coming from wage growth.
Following Lagarde's comments, the EUR/USD has gained traction and was last seen rising 0.13% on the day at 1.0780. Lagarde's speech highlights the ECB's cautious approach to the current economic situation and its commitment to addressing inflationary pressures while navigating through the uncertainty posed by current times.
