Christine Lagarde is cementing her credentials as the biggest hawk among major central bankers

 despite the mounting banking stress, handing financial markets a reason to buy the euro and sell German bonds.

The president of the European Central Bank last week declared getting euro-area inflation back on target is “non-negotiable” and won’t involve “trade-offs,” days after she boosted interest rates by 50 basis points.

 ECB’s relative hawkishness is partly a reflection of the fact that it only started lifting rates about four months after the Fed  It may be only a matter of time until Europe shows significant signs of strain, according to Daniel Morris, chief market strategist at BNP Paribas Asset Management.  

“If anything, the inflation dynamics are worse in the euro zone,” he said. “If you need a recession in the US to get inflation down, why not in Europe too?”

Bloomberg 26 March 2023


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