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Jerome Powell, Chairman of the Federal Reserve System (Fed), and Christine Lagarde, President of the European Central Bank (ECB), are presenting at the ECB Forum on Central Banking in 2023. Along with Powell and Lagarde, Bank of England Governor (BoE) Andrew Bailey and Bank of Japan Governor (BoJ) Kazuo Ueda will participate in the same panel, with the market focusing on identifying future paths for the interest rate trajectory, determining whether rate decisions will synchronise or diverge in the coming months.
Following the June policy meeting, the Fed held its policy rate constant at 5%-5.25%, but left the door open for a 25 basis point (bps) rate raise in July. The ECB lifted key rates by 25 basis points in June, and Lagarde stated that the ECB is extremely likely to raise rates again in July. In an unexpected move, the Bank of England raised its policy rate by 50 basis points to 5% in reaction to robust wage inflation and Consumer Price Index (CPI) numbers in May. Finally, the Bank of Japan maintained its loose policy settings in June, although many believe the Bank of Japan may review its Yield Curve Control plan as early as next month for a revision.
The following are the major findings from the ECB forum Q&A sessions in Sintra:
“Policy hasn’t been restrictive for very long.”
“We believe there’s more restriction coming, driven by labor market
“We believe there’s more restriction coming, driven by labor market.”
“Strong majority for two more rate hikes in dot plot.”
“As you get closer to target, you’re closer to a place where risks become more in balance.”
“Wouldn’t take moving at consecutive meetings off the table.”
Powell
Lagarde: “We still have ground to cover.”
“If the baseline stands, we know we will likely hike again in July.”
Lagarde
“UK economy turned out to be much more resilient.”
“Data showed clear signs of persistence of inflation.”
“We will do that is necessary to get inflation to target.”
Bailey
