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Lane's speech has something for everyone

ECB
  • Overall Lane gave more insight into the ECB's thought process - assessing the terminal rate both structurally and cyclically and then assessing how quickly policy rates should be increased to that terminal rate.
  • However, he gave little away in terms of how large the next hike should be... He made the argument that long-run inflation expectations remain well anchored but that there are right-tail risks that need to be paid attention to. He also made the point that most economists were expecting a recession or at least a "slowdown" (note the speech does NOT include the word recession), and that moving in "multi-steps" makes it easier to "undertake mid-course corrections if circumstances change."
  • So all in all, fairly balanced comments from Lane and there is something for everyone. You can read this as paying more attention to right tail inflation exp risks in which case a larger hike (75bp?) seems more appropriate, or that "slowdown" risks warrant a more gradual approach (25-50bp).
  • Euribor Mar-23 future has moved from 97.80 ahead of the speech to a low of 97.775 and now is back to 97.82. The day's high is 97.845 around an hour ago.
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