Lagarde’s sayings fail to convince of ultra-flexible policy

European Central Bank President Christine Lagarde’s attempt to secure a commitment to ultra-flexible monetary policy was not enough on Thursday as investors kept bets alive that interest rates will rise next year.

After submitting an economic evaluation that no longer qualified as “temporal“The rise in inflation, and acknowledging that it will last longer than originally anticipated, read a prepared comment apparently intended to counter expectations of a monetary tightening before the end of 2022.

“Our analysis certainly does not support that the conditions of our future direction are met when markets expect to rise, or at any time in the near future.”He told reporters during a virtual press conference in Frankfurt, before adding that“If the markets are getting ahead of themselves? It is not up to me to say it ”.

Investors clung to bets that the ECB will have raised interest rates at least once next September, a move that would amount to a drastic change in position from the ultra-lax emergency environments that monetary policymakers will be facing. They have promised to hold until March.

Lagarde’s meeting with journalists came within hours of investors doubling their rate hike bets. While that may reflect a global environment in which central banks, from the UK to New Zealand, are rapidly turning to tighten, the president of the ECB said that such comparisons were “hateful”.

“The perspective is different, the level of inflation they have is different, some of them are already at or above the goal“, said.

While Thursday’s decision was timed as a prelude to the December showdown over the future of emergency stimulus, Lagarde found himself surprisingly in the market spotlight with a series of bullish bets that seemed to question the commitment of the ECB with ultra-low rates.

Money markets cut rate hike bets only slightly after she spoke, betting at 17 basis points of adjustment by the end of next year compared to 21 basis points they forecast during the press conference.

Policy makers chose to maintain the current pace of buying emergency bonds, in a decision that is only a prelude to the December meeting, when they must determine the future of stimulus after its 1.85 trillion euro program, known as PEPP.

“Right now, I expect PEPP to end by the end of March“, said Lagarde. “It will be seen if we will use all the resources or not”.