Surprise in the tone of the statements after the ECB meeting

Published on February 8, 2022 Last week we were left with a surprising ECB meeting, which was joined by some far-reaching macro data on both inflation and employment. In summary, we had an ECB meeting with a very hawkish turn from its president Christine Lagarde, which has put much of the market on alert and unnerved. No changes compared to the measures adopted at the December meeting, but where it does seem that the members of the ECB have been surprised by the evolution of inflation. The 5.1% published last Wednesday seems to have been enough to force Lagarde to show a greater predisposition to accelerate the withdrawal of stimuli, if this path of inflation is confirmed. It seems that everything is subject to the inflation data prior to the meeting on March 10, to consider the possibility of canceling the APP even this year (Q3), which would be the prelude to the first rate hike. Although Lagarde yesterday adopted a less aggressive tone in her statements in the European Parliament, emphasizing the normalization of politics, with net purchases finishing first and implying that the institution will be dependent on data and that they will not rush to jump to conclusions when adjusting policy. The president herself indicated that any tool or instrument will be used to ensure that monetary policy is transmitted throughout the Euro Zone and to all member states when the conditions are met. Lagarde also stated in these statements that the institution will remain attentive to the next inflation data analyzing the implications for the forecast of inflation in the medium term, since the tightening of the central bank’s monetary policy will be gradual. According to Lagarde’s words before Parliament, she pointed out that there is no excess demand or overheating of the labor market. There is no evidence that inflation will be much above the medium-term target, and prospects for inflation to stabilize at 2% have increased. Today we will have statements from Council members Pablo Hern├índez De Cos and Fran├žois Villeroy, who already seem to be changing their discourse and advocating gradual action. In short, the evolution of inflation will continue to support the change in the ECB’s hard line and, according to some analysts, could lead to rate hikes in the last quarter of the year. Money markets currently price the possibility of a June rate hike at 80% and over 50bps in December. In short, the conclusion of the meeting is that the European Central Bank tried to reassure the market not to jump to conclusions, as they stated that they will carefully analyze the March projections and there will not be a rate hike until our net asset purchases end. . Following the strong appreciation in the money market and the widening of spreads, they also assured that the exit process will follow the sequence and that, in all likelihood, it will be gradual, which could argue for some stabilization in the short term. INFORMATIONTitleSurprise in the tone of the statements after the ECB meetingDescriptionLast week we were left with a surprising meeting of the ECB, which was joined by some far-reaching macro data on both inflation and employment. In summary, we had a meeting of the ECB with a very hawkish turn from its president Christine Lagarde, which has puzzled and put a large part of the market on alert. Author GLOBALCAJA

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