Lagarde: Not Possible To Determine Future Rate Path Given Uncertainty

The Q&A with Pres Lagarde begins with her saying the ECB still has "a lot of ground to cover" but that given "elevated" "uncertainty", it is "not possible" to determine the rate path going forward.

• Q: How do you see the path of interest rates ahead? Have we already reached the peak? Do you see any risks of a systemic crisis as in 2008?
• A1: I refer you to the first paragraph which details the three elements of our reaction function: 1. The assessment of the inflation outlook in light of the economic and financial market data. 2. The dynamics of underlying inflation. 3. The strength of our monetary policy transmission.
• We know we have a lot of ground to cover. But it is a big caveat: if our baseline was to persist. Our forecasts have a cut-off date. Since March 1st a lot has developed. The projections do not incorporate these developments, including the financial market tensions.
• There is a level of uncertainty that has been elevated. That is why we have reinforced the principle of data dependency with a clear map of the reaction function for the future. It is not possible at this point in time to determine the path going forward.
• A2: We are monitoring current market tensions closely. We stand ready to respond as necessary to preserve price and financial stability. We previously reformed the framework and agree on Basel III, increased the capital ratio and increased the coverage ratio. As a result, the banking sector is in a much stronger position than in 2008. If it was needed, we do have the tools to respond. Staff can also exercise creatively in short order if needed to respond to a liquidity crisis. But this is not what we are seeing.