ECB President Lagarde says the uncertainty surrounding the outlook for euro area inflation has increased significantly following the outbreak of the war in the Middle East
- Inflation could turn out higher than the baseline, in particular if inflation expectations and wage growth were to rise more than expected.
- Risks to the outlook are tilted to the upside, especially in the near term
Context
Lagarde's remarks highlight increased uncertainty surrounding euro area inflation, amplified by geopolitical tensions. The potential for rising inflation expectations and wage growth could shift the European Central Bank's stance, leaning towards a more hawkish approach in their policy guidance. Traders should consider the implications for EUR and fixed income as market participants reevaluate the rate trajectory.
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