ECB signals measured rate hikes as eurozone inflation cools and yen weakens
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4 days · 2 summary articles
ECB signals measured rate hikes as eurozone inflation cools and yen weakens
Euro tumbles to one-year low as oil prices fall to pre-war levels
Christine Lagarde signals ECB’s return to ‘basics’ as eurozone inflation cools
Christine Lagarde, President of the European Central Bank, used the ECB Forum in Sintra on Tuesday to outline a return to core monetary principles, insisting that the bank can now raise interest rates without triggering financial instability despite lingering price pressures. Speaking at the annual gathering in Portugal, Lagarde said the ECB is “back to basics,” stabilising inflation primarily through policy rates while acting in a measured, meeting-by-meeting fashion . She added that Europe’s enhanced economic resilience allows it to absorb shocks more effectively, even as global volatility rises.
The remarks come as new data suggest inflationary pressures in the eurozone are easing. A June sentiment indicator released on Tuesday points to softer price growth, reducing urgency for aggressive ECB action . Lagarde also noted that oil prices have retreated more quickly than expected, further diminishing the need for forceful tightening . While she did not rule out a modest rate increase later this year, she stressed that the ECB no longer needs to fight inflation with the same intensity as during the 2022–23 surge .
The shift reflects a broader recalibration at the ECB, which has abandoned single-point forecasts in favour of scenario-based projections—a move criticised by Bank of England Chief Economist Huw Pill as complicating collective decision-making . Lagarde dismissed concerns about financial market stress, stating in Sintra that rate hikes can proceed without triggering systemic tension .
Across the Atlantic, the Federal Reserve remains on hold, according to a June survey of analysts, while the Bank of England is also expected to maintain rates despite hawkish rhetoric from some officials . Meanwhile, the yen’s slide past ¥162 to the dollar has raised intervention risks, with Maybank analysts warning that Japanese authorities retain ample ammunition to defend the currency . The yen’s 40-year low has sparked concerns over potential government pushback against further Bank of Japan rate hikes .
In Greece, policymakers secured pledges from supermarket chains and food producers to keep prices stable through the summer, aiming to curb inflationary pressures ahead of peak tourist season . Meanwhile, the European Commission reported that the Czech Republic meets most euro-adoption criteria, though political hurdles remain .
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