Lagarde and Schnable speeches are a clear tactical shift from the ECB and a call to arms

Schnabel

  • Risks are growing that current high inflation is becoming entrenched in expectations
  • Inflation could stay at painfully high levels for a considerable period of time
  • The urgency for monetary policy to take action to protect price stability has increased in recent weeks
  • Risks are rising that current high inflation is becoming entrenched in expectations
  • We have to underline more forcefully our determination and commitment to protect our primary mandate
  • It is time to put an end to the measures that were activated to fight low inflation
  • Underlying price pressures can be expected to persist for as long as global supply and demand imbalances do not improve visibly
  • Labor market conditions in the euro area continue to tighten
  • The share of companies in the euro area reporting labor as a factor limiting production is now higher than ever before
  • Full text

I can’t see this speech combined with Lagarde’s monumental shift to be anything other than a coordinated effort at the ECB to signal a higher, longer path of interest rates.

I think market participants are so blind to ultra-low ECB inflation

Inflation

Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market. also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.

Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market. also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.
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messaging and dovishness that they can’t see these speeches for what they are: A call to arms.

Lagarde storm meme

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