In her IMFC statement, ECB President Christine Lagarde said economic indicators are pointing to a “strong rebound in activity” in tQ3. Though, the rebound is “uneven across sectors and regions”. A sustained recovery remains “highly dependent” on how the pandemic affects consumption, savings and investment decisions.

Lagarde expects inflation to “remain negative over the coming months”, but turn positive again in early 2021. Over the meeting term, ” a recovery in demand, supported by accommodative monetary and fiscal policies, will put upward pressure on inflation.”

She reiterated that “we continue to stand ready to adjust all of our instruments, as appropriate, to ensure that inflation moves towards our inflation aim in a sustained manner, in line with our commitment to symmetry.”

Full statement here.

In a European Parliament committee hearing, ECB President Christine Lagarde said, “growth momentum is moderating to some extent owing to supply bottlenecks and the rise in energy prices.” Consumer spending is “solid”, but shortages of materials, equipment and labour are “weighing on manufacturing production, weakening the near-term outlook.” “Although the duration of supply constraints is uncertain, they are likely to persist for several months and gradually ease only during 2022,” she added.

Lagarde also reiterated that the upswing in inflation is driven by three primary forces, energy prices, demand outpacing constrained supply, and reversal effect of German VAT cut. “The latter factor will fall out of the inflation calculation from January 2022 but the other two may last longer.” “As a result, we still see inflation moderating in the next year, but it will take longer to decline than originally expected,” she said.

On monetary policy, she said the conditions for rate hike are “very unlikely to be satisfied next year”. Intentions on further calibration of bond purchases will be announced in December. But “even after the expected end of the pandemic emergency, it will still be important that monetary policy – including the appropriate calibration of asset purchases – supports the recovery throughout the euro area and the sustainable return of inflation to our target of two per cent.”

Full introductory statement here.

ECB President Christine Lagarde told Dutch television over the weekend, “we are going to follow the path of stopping net asset purchase. Then, sometime after that — which could be a few weeks — hike interest rates.” That’s seen as an indication that a rate hike could happen in July, after stopping asset purchases in June.

Governing Council member Klass Knot floated the idea of a 50bps hike earlier. But Lagarde said, “it’s not something that I can tell you at this point in time.” She emphasized, “we need to make sure that this is going gradually enough so that we don’t put the break on this car that is moving. We have to lift the accelerator for sure to slow inflation but we cannot be breaking any speed.”