Lagarde Press Conference: Key Takeaways

Lagarde started the conference by pointing out that the ECB's communication would now be easier to read. Here are they key statements:

• higher inflation is likely to be temporary, the outlook for inflation remains subdued
• the economy rebounded in Q2, accelerating in Q3
• supply problems still remain unresolved
• Delta variant remains a problem, it may lower the prospects of the service sector
• economic activity will return to normal in Q1 2022
• inflation will be falling from the beginning of next year due to base effects
• ECB must maintain the current stimulus for the economy

Lagarde identified 3 inflation conditions that must be met in order to consider an interest rate hike:

• 2% inflation forecast well ahead of the end of the forecast period
• inflation stable at 2% or higher after reaching the target in the forecasts (in the further part of the forecast horizon)
• inflation cannot be below 2% for interest rates to increase, inflation in the medium term must be at 2%
• 2% inflation target must be reached at least halfway through the forecast period

Lagarde further emphasizes that interest rates will remain unchanged for an extended period of time. She says the new guidelines do not mean "low for longer" but does not want to lead to monetary tightening too soon. Lagarde emphasizes the word "patience". The ECB has not yet considered the future of the PEPP.