ECB’s Lagarde: Conditions for a rate hike very unlikely to be met in 2022

We still see inflation moderating in the next year, said the European Central Bank (ECB) President, Christine Lagarde, before the Economic and Monetary Affairs Committee of the European Parliament.

Additional quotes:

• It will take longer to decline than originally expected.
• We can expect price pressures on goods and services to normalise as recovery continues and supply bottlenecks unwind.
• There is an indication of a noticeable easing of energy prices in 1H 2022.
• The duration of supply constraints is uncertain though.
• Likely to persist for several months then gradually ease during 2022.
• Growth momentum moderating to some extent, owing to supply bottlenecks and rise in energy prices.
• Undue tightening of financing conditions is not desirable, would represent an unwarranted headwind for the recovery.
• Conditions for a rate hike are very unlikely to be met in 2022.

Market reaction:

The was pretty much the repetition of the view that the recent rise in inflationary pressures is transitory and that the ECB will maintain its accommodative monetary policy stance. The remarks did little to provide any impetus to the shared currency or the EUR/USD pair, which remains at the mercy of the USD price dynamics.