ECB Right to Hike Rates in June, Lagarde Says in Les Echos Interview
ECB President Christine Lagarde defended the June rate hike in a Les Echos interview, signaling the central bank remains committed to taming inflation despite economic headwinds.
European Central Bank President Christine Lagarde told French newspaper Les Echos that the ECB's decision to raise interest rates last month was the correct one, pushing back against criticism that tighter policy could stifle the euro zone's fragile recovery.
The ECB lifted its deposit rate by 25 basis points in June, bringing it to 3.75%, as it continues to battle inflation that remains above its 2% target. Lagarde's remarks reinforce the central bank's hawkish stance, emphasizing that the fight against price pressures is not yet over. For rates traders, this reaffirms the ECB's commitment to data-dependent tightening, with the next move hinging on incoming inflation and wage data. The euro zone's yield curve has flattened in recent weeks as markets price in a slower pace of hikes, but Lagarde's comments could prompt a reassessment of rate expectations. NowPrice's real-time rates quotes show the German 10-year Bund yield hovering near recent highs, reflecting the ongoing policy uncertainty.
Looking ahead, traders will focus on the ECB's July meeting, where another 25-bp hike is widely expected. Key data releases include euro zone inflation figures for June, due next week, and the ECB's quarterly bank lending survey, which will provide clues on how tighter policy is feeding through to the real economy. Lagarde's interview suggests the central bank is prepared to look through short-term growth concerns to ensure inflation is sustainably brought back to target.