“It is very unlikely that the ECB will raise rates in 2022”. Word of Christine Lagarde, number one of the ECB who, speaking during an event held in Lisbon, underlined that inflation, regardless of the flare-ups in prices that are manifesting from the reopening phase of the economy, remains however too low (in the medium term).
The reaction of the BTPs was immediate, with ten-year rates that fell to 1.02% after Lagarde’s speech.
“In our forward guidance on interest rates – underlined Lagarde – we have clearly explained the three conditions that must be met for rates to start rising”. And, “despite the current jump in inflation – he continued – the medium-term outlook (on inflation) remains low, and consequently it is very unlikely that these three conditions will be met next year”.
Lagarde explained the reasons for the jump in sovereign bond yields:
“Market rates have risen in recent weeks, mainly due to the greater uncertainty on the inflation outlook, the domino effect from abroad in the euro area of interest rate expectations, as well as the questions about the recalibration of purchases of assets in the post-pandemic world “.