ECBs Lagarde is speaking, and says:
- Wage pressures have strengthen on the back of a robust labor markets, and employees aiming to recoup some of the purchasing power
- Inflation is projected to remain at too high for too long
- The key ECB interest rates remain our primary tool for setting the monetary policy stance
Last week the ECB raised rates by 50 basis points. Their actions last week may be the blueprint for the Fed on Wednesday who are still concerned about inflation (it may be less from banking concerns, but it remains above the target rate). The ECB went ahead with their rate hike and argued that they have tools to attack financial concerns, and tools to attack monetary policy concerns. Of course financial issues can snowball quickly and are disinflationary as well. Nevertheless, it seems a 25 basis point hike by the Fed is a compromise all things being equal right now.
Rates in the US I have started to move back to the upside after being lower earlier. The two year yield is currently at 3.928% which is still below the 4% level but up 8.2 basis points on the day. The 10 year yield is at 3.471% up 7.5 basis points.
Last week the US two year yield peaked at 5.085%, while the 10 year yield reached a high of 4.089%