- ECB is in a good position to respond to surging energy prices
- We are still facing intense uncertainty
- The rate hike in June already put us in a good position from which we can monitor further developments closely
- We are seeing in the Middle East that the situation remains highly fragile
- ECB should not pre-committ to any policy moves in the meantime
- Should instead analyse the heaps of incoming data between now and the next meeting in September
The comments fit in line with the communique that the central bank put out yesterday after its latest policy decision. In case you missed it:
- ECB leaves deposit rate unchanged at 2.25%, as widely expected
- ECB’s Lagarde: Recent data points to some improvement in economic activity
Lagarde herself reaffirmed that with no visible impact from second-round effects, the ECB should not act too hastily for the time being. In her words, “the burden of proof is on data” to tell policymakers if and when they feel that they should react accordingly.
While some policymakers did raise questions about a possible rate hike yesterday, the decision was ultimately unanimous. So, no drama there really. And with Nagel’s comments above, it is evident that they are all on the same page as we look to the summer break.
But as mentioned before, the threat of continued tensions in the Middle East will make it tough for the ECB to rest on their laurels. Stagflation risks will once again be a key issue once the summer comes to an end in Europe.
This article was written by Justin Low at investinglive.com.