Lagarde’s policy silence keeps ECB interest rate debate raging
Christine Lagarde's avoidance of a clear signal of intent for European Central Bank policy has just thrown a brighter spotlight on a pivotal week in the euro zone.
While the president observed on Friday that inflation remains undefeated, she didn't address prospects for the September 14 meeting, giving colleagues scope to publicly debate the need for increasing borrowing costs just as crucial data arrive in coming days.
Consumer-price numbers will set the scene for one of the most suspenseful decisions since ECB rate hikes began more than a year ago, as officials ask if additional monetary tightening is an imperative, or whether a souring economic outlook is bleak enough to warrant a pause.
Those who attended the Federal Reserve's Jackson Hole conference alongside Lagarde will have heard for themselves Chair Jerome Powell's own signal that US borrowing costs will stay high and could even rise further.
“Our view remains that a rate hike in September remains on a knife-edge but ultimately the ECB, with an eye on core inflation, will raise,” David Powell and Maeva Cousin of Bloomberg Economics wrote after the president's speech. By contrast, in another illustration of the close-run nature of the decision, economists at Berenberg led by Holger Schmieding changed their forecast on Friday before Lagarde spoke to put a 60% probability on a rate pause, up from 40%.
Fed Chair Powell could signal the likelihood of high rates for longer in closely watched speech
For all observers, euro-area inflation numbers on Thursday will be primordial. The so-called core measure striping out volatile elements such as energy is anticipated to have dipped only slightly to 5.3% this month from 5.5% in July, according to a
