Lagarde Sept 8 2022
  • Determined action had to be taken
  • Today wasn't an isolated decision
  • Risks to inflation tilted to the upside, risks to growth to the downside
  • Next hike not necessarily 75 bps, not the norm
  • We will determine on a meeting-by-meeting basis the level that will get inflation back to 2%
  • Initial signs of inflation expectations above target warrant monitoring
  • Wage growth still contained
  • Where we are at is not the neutral rate
  • Decision was unanimous, there were different views around the table
  • Downside scenario for growth includes negative growth in 2023, sees negative growth in 2023
  • We are 'so far away' from a policy setting that will be enough to bring down inflation
  • We don't know what the terminal rate is

Lagarde is certainly taking a hawkish stance but it's backfiring in the FX market with worries about growth and debt sustainability hurting.

EUR/USD is down 60 pips to 0.9940.