Pause in Rate Hikes ‘Not What We’re Considering at the Moment’, ECB’s Lagarde Says
28 June 2023
By Xavier D’Arcy – SINTRA, Portugal (Econostream) – The European Central Bank is not considering a pause in its hiking cycle at the moment, ECB President Christine Lagarde said on Wednesday, noting that there was not enough evidence of a turnround in core inflation to warrant a stop to rate hikes.
Speaking on a policy panel at the ECB Forum on Central Banking, she repeated that monetary policy still had ground to cover and that a hike in July was likely necessary based on current data.
A pause in rate hikes was ‘not what we're considering at the moment’, she said, adding: ‘We are not seeing enough tangible evidence of the fact that underlying inflation, particularly the domestic prices, are stabilising and moving down.’
The ECB was ‘looking at as many [inflation] measurements as we can, because we want to be in sufficiently restrictive territory for long enough so that we are confident that we reach our 2% medium term target.’
Monetary policy still had ‘ground to cover’ she said, repeating her comments that ‘if our baseline stands, then we also know that we will very likely hike again in in July.’
‘What about September? That I will not tell you and for a very simple reason that I just mentioned, we are data-dependent. We'll decide meeting by meeting’, she said.
Regarding the outlook for economic growth, she said that ‘technically, I think you could argue that we did not see a recession’ in the Eurozone because ‘the first quarter of 2023 was actually completely flat, it wasn't negative.’
However, ‘the expectations for Q2, particularly in the industrial sector, if I look at PMI numbers, are not particularly giving us great hope that there will be a strong recovery’, she said.
Transmission of monetary policy was ‘likely to be less rapid than it had been in the past because there are many more fixed rate mortgages now in the euro area than there was 15 years ago’, she said.