Christine Lagarde is developing a reputation for being the sole major central bank president to continue her aggressive interest rate hikes amid the ongoing banking turmoil. The European Central Bank president insisted that beating down European Union inflation is “non-negotiable” following the 50 basis point hike last week.
This move is in stark contrast to the Federal Reserve, with Fed Chair Jerome Powell admitting that a pause on interest rate hikes was being considered following a smaller 25 basis point increase. The Bank of England also implemented a 25 basis point hike, with Governor Andrew Bailey commenting that inflation is likely to slow “sharply”.
Analysts from Citigroup Inc., Societe Generale SA, and Deutsche Bank AG noted that Lagarde’s aggressive interest rate stance may drive up the value of the euro, which may reach $1.10 in the coming months.
“We would expect to increase our long position to the euro over the next one to two months based on a more positive trend and bond yield differentials to the US declining,” Van Luu, global head of currencies at Russell Investments, commented, adding that the Federal Reserve is expected to cease its interest rate hikes months before the European Central Bank.