- There was a concern on council not to rush into decisions
- It is important to be attentive to conditions
- We will be data dependent
- UK has had a history of much higher inflation than us
- The BOE is hiking because of a negative labour supply shock due to Brexit
- Critical difference between the UK and us is the labor market, says workers left during pandemic
- Our March meeting and, critically, our June meeting will be essential for evaluating our guidance
- We are no longer in a low inflationary environment
- Inflation is getting much closer to target
- Inflation in January was very surprising
- Won't hike rates until net QE purchases have stopped
- Inflation might be significantly higher than expected this year
- Spreads haven't widened in a significant manner, and if they do we have all the tools to respond
- The 3% decline in the euro in the last 12 months is a very small factor in higher eurozone energy prices
Lagarde has been hawkish and the euro has jumped. German 10-year bund yields are up 5.8 bps to 0.10%.
She raised expectations that something could be decided in March about monetary policy because of surprises on inflation. She also backtracked a bit on no rate increases in 2022. Market pricing now suggests a 20 bps hike by Sept, up from 10 bps previously.
A 10 bps hike is now priced for June and 40 bps by year-end. This is a major repricing.
Lagarde was defending her forecasts, saying no one say high energy prices coming but I look back to the September meeting when she was entirely oblivious to what was happening in natural gas prices then and entirely dismissive of energy inflation.
