Weekend ECB Speak Stresses Gradual Approach

Weekend ECB speak continued to push back on market pricing re: rate hikes:

• The head of Finland’s central bank, Olli Rehn, stressed that the central bank needs to look beyond the current spike in inflation. Rehn reaffirmed the idea that the lack of meaningful wage growth currently experienced may make the current inflationary impulse less sticky over the medium term.
• Bank of Italy chief Visco suggested that the ECB needs to be flexible, paying attention to the inflationary impulse, in addition to any developments/threats re: uneven financing across the Eurozone (no surprise there, given his Italian nationality).
• Bank of Ireland Governor Makhlouf was keen to pushback against investors betting on an interest rate hike in June, with policymakers cognisant of the threat of “killing off the recovery.”
• All in all, the continued message of gradualism when it comes to normalisation remained at the core of the broader rhetoric, with various governing council members (including President Lagarde) striking such a tone in the wake of the hawkish re-pricing that has been in play in the wake of the Bank’s first ’22 decision (granted, not all of the shift in pricing has been driven by local factors). Visco’s comments were seemingly a little more self-serving, which isn’t a surprise, given the sensitivity of BTPS vs. monetary tightening expectations.