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Lagarde says ECB cannot predict its next policy move

In explaining the ECB’s rate decision, Lagarde linked higher rates to potential currency support, while also noting they can weigh on non-yielding assets like gold.

Reported · Written up by our desk · Central Banks

Christine Lagarde, President of the European Central Bank, said the ECB cannot anticipate what its next move will be as it continues responding to incoming economic conditions.

In comments accompanying the ECB, Lagarde discussed the framework behind rate setting, including the ECB’s focus on price stability and its typical reference point of around 2% core inflation.

She also reiterated the broader transmission channels markets watch, arguing that higher interest rates can strengthen a currency by attracting investors, while they can weigh on gold by increasing the opportunity cost of holding an asset that does not pay interest.

Lagarde placed the discussion in context of central bank policy, describing how policy rates are normally used to influence lending and borrowing conditions, and referenced how expectations for the US Fed funds rate are tracked by tools such as CME FedWatch.

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