Remarks by ECB president, Christine Lagarde
- Forward guidance on rates outlined three conditions that needs to be satisfied
- Despite inflation surge, said three conditions are unlikely to be satisfied next year
- Even after PEPP ends, important for monetary policy to support recovery
- That includes appropriate calibration of APP purchases
- Undue tightening of financing conditions is not desirable when purchasing power is being squeezed by higher energy and fuel bills
The part on rates is the key passage as Lagarde pushes back against market bets on ECB rate hikes - which we have already seen pulling back since the start of the week.
Currently, the market is seeing a 10 bps rate hike for the ECB in December 2022 as compared with two rate hikes priced in for October 2022 at the end of last week. But in any case, this talk is largely conjecture as the ECB is not really in a position to hike rates as their next big policy move will be increasing APP purchases once PEPP ends in March next year.
