ECB's Lagarde says the ECB will ensure that a phase of high inflation does not feed into inflation expectations, allowing too-high inflation to become entrenched

• We have acted decisively, raising rates by 200 basis points, and we expect to raise rates further to the levels needed to ensure that inflation returns to our 2% medium-term target in a timely manner.


• We expect to raise rates further – and withdrawing accommodation may not be enough


• Inflation in the euro area is far too high.


• Historical experience suggests that a recession is unlikely to bring down inflation significantly, at least in the short run.


• Interest rates are, and will remain, the main tool for adjusting our policy stance.


• But we also need to normalise our other policy tools and so reinforce the impulse from our rate policy.


• It is appropriate that the balance sheet is normalised in a measured and predictable way.

Via ECB

Reaction details (08:50)

• While this language from Lagarde is familiar, her continued emphasis on raising rates further and that withdrawing accommodation may not be enough has seemingly placed further pressure on the fixed income complex, with yields lifting across the board as such. Following her speech, Bund Dec'22 was initially choppy but has in the 15-minutes since fallen from 139.85 to 139.60; though, to be clear, the complex was under modest pressure prior to Lagarde's remarks.

Analysis details (08:37)

• Overall, the remarks from Lagarde are in-fitting with the recent policy announcement and her communication since then. Lagarde does not give anything away on the discussion between 50bp or 75bp, providing the reiteration that "We expect to raise rates further – and withdrawing accommodation may not be enough"; for reference, Lagarde said similar on November 4th, available here.


• Additionally, the ECB President's language around TLTRO adds little and does not provide much insight into today's repayment amount publication, a release that coincides with the altering of the TLTRO terms as announced in October.

18 Nov 2022 - 08:30- Fixed IncomeImportant- Source: ECB