ECB’s Lagarde: Eurozone inflation will stay high in near-term so a 50 bps rate hike is increasingly certain

“Underlying inflation in the Eurozone will stay high in the near term so a 50 basis point European Central Bank (ECB) interest rate increase later this month is increasingly certain,” ECB President Christine Lagarde told Spanish media group Vocento per Reuters.

Lagarde said in Sunday’s speech, per Reuters, that the flagged increase is now "very very likely" but she also warned that underlying inflation, which filters out volatile food and fuel prices, could stay uncomfortably high even as the overall inflation rate drops in the coming months.

"In the short term, core inflation is going to be high," per ECB’s Lagarde.

ECB’s Lagarde also stated that they must continue to take whatever measures are necessary to bring inflation back to 2%. And they will do so. “Eurozone economy is holding up better than feared and output should accelerate from near stagnation in the closing quarter of 2022,” adds the central banker.

Market reaction

EUR/USD bulls take a breather around 1.0625 after posting the biggest weekly gains in nearly two months.

Also read: EUR/USD Price Analysis: Bulls eye a test of bear's commitments near 1.0700