European Central Bank President Christine Lagarde said on Saturday that a bond selloff is tightening financing conditions in the euro zone, which will slow growth and reduce inflation more than previously projected. The ECB has raised interest rates twice in the last four months and is expected to hike again in December.
The comments from ECB President Christine Lagarde and other policymakers indicate a continued hawkish stance, suggesting further interest rate hikes may be necessary to combat inflation in the euro zone. This tightening of financial conditions directly impacts borrowing costs for consumers and businesses, potentially slowing economic activity.
European Central Bank President Christine Lagarde said on Saturday that a recent selloff in bonds is making borrowing more expensive in the euro zone, which will curb economic growth and ultimately inflation. Speaking in Bangkok, Lagarde noted that long-term interest rates have risen notably since the ECB's last meeting, a development she expects will slow growth and reduce the pass-through of higher fuel prices more than projected.
The ECB has already raised interest rates twice in the last four months and anticipates a further hike in December, which would bring its policy rate to 2.75%, a level considered restrictive. Fellow ECB policymaker Joachim Nagel echoed the sentiment that the fight against inflation is not over, suggesting that additional tightening might be necessary. Olli Rehn, another ECB policymaker, stated that the central bank will remain vigilant for any signs of second-round effects from energy inflation impacting other prices and wages.
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