Jerome Powell (fed) Christine Lagarde (ECB), Andrew Bailey (BoE) e Kazuo Ueda (BoJ) sitting at the same table to discuss monetary policy and the economy. A more unique than rare event that has attracted the attention of international markets, eager to hear the words spoken by central bankers at the ECB Forum in Sintra and to glean some useful information on the near future. And the indications have arrived: from both sides of the ocean the hikes will continue because the 2% inflation target is still very far from being achieved both in the US and in Europe.
The hawks therefore continue to have the upper hand, despite the monetary tightening having already begun to show the first negative effects on the economy, and despite the criticisms of politics. The latest in chronological order came from the Prime Minister, Giorgia Meloni, who, speaking in the Chamber, used harsh words towards the ECB: "Inflation has returned to hit our economies, a hateful hidden tax that it is right to fight with decision,” he said. Then the lunge: the "simplistic" recipe of the ECB "does not appear in the eyes of many the most correct path to pursue". This is because inflation is not given by "an economy that grows too fast, but by internal factors such as the crisis in Ukraine" and "one cannot fail to consider the risk that the constant increase in interest rates is a more harmful cure than the disease ”.
Powell, the Fed's tightening does not stop: "More hikes will be needed"
“We raised interest rates by 500 basis points in just over a year and we still have some restrictions to makeFederal Reserve Chairman Jerome Powell said as he spoke at the governors' debate at the ECB Forum in Sintra. The number one of the Fed explained that the majority of the committee that decides the monetary policy line “wants two more rate hikes in consideration of the fact that the macro data indicate that both the economy and inflation remain higher than expected”. “So – he continued – we are in restrictive territory, but we haven't been for quite some time e we still have to do more”. Powell said he was also considering the possibility of the US joining recession, but said he doesn't think it's the 'most likely scenario'
Responding to a question from reporter Sara Eisen about the June pause, when the Fed first set a first stop on hikes, Powell said: some time to understand the impacts on the growth of the economy”. What will the Fed do in July? “We haven't made any decisions yet,” the governor cut short.
Speaking of the recent past, Powell then explained: “Covid is likely to feel a long-term impact on the economy, with lower productivity and losses in terms of education and training. How persistent this impact will be is difficult to say.
Lagarde confirms new hikes: "We're not considering breaks, we'll stay in restrictive territory long enough"
“We have already come a long way and raised rates by 400 basis points in a short time but we know that we still have some way to go“, ECB President Christine Lagarde said during the governors' debate in Sintra. “We will continue to depend on the data – said Lagarde – we will make decisions from meeting to meeting but we know we still have some way to go and we know that given the current circumstances in July we will have to raise again".
When asked if it is planned an increase also in September, Lagarde replied that by September “we will have received many more data and the September meeting will be another meeting in which the new projections of the ECB staff will be presented. So we will have a lot of information on the basis of which we can make a decision ”.
"We are not considering a breakin rate hikes, Lagarde said. “We see no tangible evidence that underlying inflation is falling and in particular that prices are stabilizing and falling,” the president said, underlining that “we want to stay in restrictive territory long enough” to bring inflation back to 2 %.
In answering Eisen's question about the possibility of making a change to the inflation rate target, which for all four central banks is equal to 2%, Lagarde said he did not consider the question "the subject of debate", emphasizing the need for , against stubborn inflation, proceed equally stubbornly and persistently.
The market reaction
The markets, which were anxiously awaiting the governors' words, reacted positively to the news from Sintra. No particular variation on the secondary, where lo spread between Btp and Bund it is slightly down to 164 points and the yield on the Italian 3,97-year bond is XNUMX%.
Speaking instead of Bags, Paris and Madrid gain 0,9% closely followed by Milan and Frankfurt which score +0,8%.
On the currency front, theeuro is down slightly to 1,0922 against the dollar. Gold, considered the safe haven asset par excellence, recorded a rise of 0,2% to 1.909 dollars an ounce.
