The euro remained steady on Thursday after European Central Bank (ECB) President Christine Lagarde announced that further interest rate hikes would be implemented as inflation in the eurozone remains stubbornly high.
Eurozone inflation decreased from 7.0% to 6.1% in May, beating estimates of 6.3% from a Reuters poll of analysts. Still, European policymakers believe that there is more work to be done as inflation remains significantly higher than the ECB’s target rate of 2%.
“Today, inflation is too high and it is set to remain so for too long,” Lagarde declared in a speech on Thursday morning. “We have made clear that we still have ground to cover to bring interest rates to sufficiently restrictive levels.”
In response to Lagarde’s statement, markets have now priced an 85% chance of a 25 basis point hike when the ECB convenes for its policy meeting on June 15.
On the morning of the announcement, the euro remained flat at $1.0692, above the two-month low of $1.0635 that it hit on Wednesday.