Lagarde painting

Markets and ECB President Christine Lagarde are at odds.

Right now, the rates market is pricing in s 68% chance of an ECB rate cut in April and a certainty of one in June (and two in September). Meanwhile, Lagarde spoke with the FT today and said that inflation could fall to 2% if rates are held at the current 4% level for long enough.

“It is not something that [means] in the next couple of quarters we will be seeing a change. ‘Long enough’ has to be long enough," she said.

The early theme of trading in 2024 in many currencies will be market pricing of rate cuts against central banks trying to stay higher for longer. The long history of this kind of conflict shows that central bankers fold sooner than they promise.