Europen Central Bank governor, Christine Lagarde has said that even though most measures of longer-term inflation expectations currently stand at around 2%, these measures warrant continued monitoring.
She says price pressures remain strong and underlying inflation is still high. She intends to lift rates by 50 basis points at the March meeting.
Lagarde says while confidence is rising and energy prices have fallen, we expect activity to remain weak in the near term.
EUR/USD update
Lagarde’s comments are supporting EUR/USd at the time of writing. The Euro meanwhile, fell against the US Dollar on Wednesday after hotter-than-expected US Retail Sales data last month, coming a day after a report showing stubbornly high US consumer prices. EUR/USD is currently trading down some 0.6% after falling from a high of 1.0744 to a low of 1.0661 in the day’s range so far.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Read More
On Tuesday, February 25, European Central Bank (ECB) President Christine Lagarde revealed her plans for an interest rate increase in March. Speaking in Barcelona, Lagarde said that the ECB Board of Governors had proposed a “50 basis point increase”, aimed at stimulating economic growth in the Euro Area.
The proposed increase in ECB interest rates has been long anticipated and will be the first since March 2016. The last rate change was a negative 10 basis point cut in September of 2019. Lagarde commented that the ECB Board of Governors is “cautious yet confident” about the decision and that it was “time to act.”
Lagarde also noted that she considered the ECB’s current level of interest rates to be “neutral,” allowing for growth but also not adding extra stimulus. The ECB’s current target rate is -0.5%, meaning that banks are expected to pay a penalty to deposit money in the ECB. The proposed rate increase of 50 basis points would bring the target rate to 0%.
The ECB Board of Governors also discussed the possibility of increasing inflation, another measure that would aid economic growth. Lagarde noted that while inflation should increase as the rate hike is implemented, the ECB Board of Governors is “focused on ensuring that [inflation] remains on course.”
The proposed rate increase from the ECB Board of Governors exemplifies their commitment to a sustainable path of economic growth. Further announcements about the specifics of the rate hike are expected closer to the March meeting.
