Further comments are flowing in from the European Central Bank (ECB) President Christine Lagarde, as she continues to push back rate hike expectations beyond 2022.
Key quotes
We do not take this phase of higher inflation lightly. But in our strategy review we have agreed on how to approach the type of situation we face today.
Monetary policy today must therefore remain patient and persistent, while being alert to any possible destabilising dynamics emerging.
Moreover, even after the expected end of the pandemic emergency, it will still be important for monetary policy – including the appropriate calibration of asset purchases – to support the recovery and the sustainable return of inflation.
The conditions to raise rates are very unlikely to be satisfied next year.
It takes time for stronger inflation dynamics to become self-sustained, and reacting too early to signs of rising inflation can derail that process.
Energy prices are set globally and supply bottlenecks cannot be remedied by the ECB’s monetary policy.
Tighter monetary policy would only exacerbate the contractionary effect on the economy.
The tightening would not affect the economy until after the shock has already passed.
Market reaction
EUR/USD flirts with daily lows near 1.1330 on dovish comments from the ECB Chief.