Lagarde: Interest rates will not peak soon, will continue to raise rates in July!

　　On Tuesday, European Central Bank (ECB) President Christine Lagarde stated that the ECB may not be able to announce the end of its historic interest rate hike cycle soon.

　　Lagarde stated that even if policymakers decide to suspend interest rate hikes in the coming months, they will still maintain the tendency towards monetary tightening and reiterated that borrowing costs will be raised for the ninth consecutive time in July to reduce inflation.

　　She said at the annual forum of the European Central Bank held in Sintra, Portugal, on Tuesday: "The European Central Bank is unlikely to announce with confidence that interest rates have reached their peak in the near future. Unless the prospects change significantly, we will continue to raise interest rates in July."

　　Although overall inflation in Europe is receding, potential price pressures remain stubborn, and the final stage of the European Central Bank's interest rate hike has become the focus. Most economists expect officials to maintain deposit rates at 3.75% after the last 25 basis point interest rate hike next month, while the money market expects deposit rates to peak at around 4% later this year.

　　Morgan Stanley Chief Global Economist Seth Carpenter said, "At present, policymakers can only say, 'We have many options, and various options are already on the table. If necessary, we will continue to raise interest rates.' I don't think they have a chance to declare victory in the short term

　　A major issue currently is how radical interest rate hikes with lagging effects will affect the economy.

　　In practice, the strength of monetary policy transmission will determine the impact of interest rate hikes on inflation, which will be reflected in the expected policy path. Industries such as manufacturing and construction, which are more sensitive to interest rate changes, are reflecting the initial effects of tightening policies, "Lagarde said

　　The annual forum of the European Central Bank comes as the economic outlook is deteriorating. Last week's data showed that economic activity in the 20 countries of the Eurozone (EARN) almost stagnated in June. Monday's data showed an unexpected sharp decline in the business outlook for Germany (GER).

　　In response, she expressed that, We need to clearly convey that as long as necessary, we will maintain high interest rates. This will ensure that there is no premature expectation of policy reversal and enable the full impact of our past actions to be realized. In the face of a more sustained inflation process, we need a longer lasting policy that not only generates sufficient tightening in the current situation, but also maintains restrictive conditions until we are convinced that 'inflation is the second' The stage 'has passed

　　On Wednesday, Bank of England (BoE) President Bailey, European Central Bank (ECB) President Lagarde, Federal Reserve (Fed) President Jerome Powell and Bank of Japan (BoJ) President Kazuo Ueda will gather at the ECB Central Bank Forum for group discussion.

　　Under the bombardment of hawkish rhetoric from Lagarde, European stock markets fell for the seventh consecutive day, setting a record for the longest consecutive decline since 2018.