ECB President Christine Lagarde, while speaking at the ECB Forum today , emphasized that the bank”s job was far from over. She reiterated that “barring a material change to the outlook, we will continue to increase rates in July.”
As ECB treads further into restrictive territory, Lagarde indicated that the central bank would be paying close attention to two aspects of its policy – the “level” of rates and the communication around future decisions, particularly in terms of “length” of time rates are expected to stay at that level.
She underscored the presence of two main uncertainties affecting the “level” and “length” of the bank”s interest rate policies.
The first is the uncertainty about inflation persistence, which makes the peak level of rates state-contingent. The second involves the uncertainty around monetary policy transmission, an issue heightened by the fact that Eurozone has not experienced a sustained phase of rate hikes since the mid-2000s and has never witnessed such swift rate rises.
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