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CHINA PBOC CONDUCTS CNY0.7 BLN VIA 7-DAY REVERSE REPOS WEDS

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Lagarde: Sept Hike Bigger Than 25bp Depends On Inflation Outlook

ECB

Lagarde suggests that the size of a rate hike at the September meeting will depend on the medium-term inflation outlook in that meeting's projections: if 2.1% or higher, the ECB will look to hike by more than 25bp. Market pricing for Sept didn't change on those comments, having already anticipated a chance of a >25bp hike.

Q: Was today’s decision unanimous? Did you consider raising rates more than 25bp in July?

  • A: The discussions led to an unanimously approved decision. We are on a journey and this is an important step. We are setting a path where July and September are the first steps on the path to raising rates.
  • The calibration of the September rate increase will depend on the updated medium term inflation outlook. This is quite precise as a commitment.
Q: If the inflation outlook is not cut back down, will we see a 50bp hike in September? Will you raise all three rates in September?
  • A: We expect to raise the key interest rates in September. The calibration will depend on the updated medium term inflation outlook. If the outlook persists or deteriorates, a larger increment will be appropriate at the September meeting.
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