Lagarde Hawkish: Pause is not the end, further rate hikes may follow

European Central Bank President Lagarde warned the market that even if the interest rate hike is suspended in September, the follow-up may also raise interest rates again, pouring cold water on the dovish expectations that the market ignited last week. In an interview with Le Figaro on July 28, local time, Lagarde reiterated her attitude on whether to raise interest rates in September-"policy interest rates may or may not rise further" in September.> **No matter when, whether in September or later, a pause (rate hike) is not certain. **She also said:> We are in an environment full of uncertainty, and we will reassess the situation and our actions on the basis of each meeting.>> We are committed to bringing inflation back to target in a timely manner, for which we need to adopt a fully restrictive policy in terms of the level and duration (of interest rates). On July 27, [the European Central Bank raised interest rates by 25 basis points as scheduled](https://wallstreetcn.com/articles/3694237?keyword=%E6%AC%A7%E5%A4% AE %E8%A1%8C), there was a key change in the ECB's statement on whether to raise interest rates further in the future, from "will ensure that interest rates reach a sufficiently restrictive level" to "will ensure that interest rates remain at a sufficiently restrictive level for the necessary time". This revision was interpreted by the market as dovish. Lagarde emphasized at the press conference that the wording changes in the statement are not arbitrary or irrelevant, and said that he will be open to decisions in September and beyond. Interest rate hikes may be raised in September, or interest rate hikes may be suspended, but Will not cut interest rates. At present, * * economists still predict that the European Central Bank will continue to raise interest rates, but not necessarily in September. **According to the median forecast of economists, the euro zone's July reconciliation CPI released on Monday afternoon rose 5.3 percent year-on-year, while the core reconciliation CPI rose 5.4 percent year-on-year, the first time since early 2021. Lagarde also said:> France, Germany and Spain's GDP data in the second quarter is very encouraging, * they support our expectation of 0.9 GDP growth in the euro area this year. **Germany, the locomotive of Europe's economy, finally emerged from recession in the second quarter. Data show that Germany's GDP was flat month-on-month after the second quarter adjustment, lower than the 0.1 per cent growth expected by economists. However, the revised data for the previous quarters showed that the economic downturn was smaller than initially expected. The analysis expects euro zone GDP to grow 0.5 percent year-on-year in the second quarter, down from the previous value of 1 percent, and **GDP grew 0.2 percent in the second quarter, reversing the trend of negative growth in the first quarter. * *