ECB Bid to Diverge From Fed Pits Lagarde Against Tide of History

ECB President Christine Lagarde insists on continuing monetary tightening despite the Federal Reserve's hint on a possible halt to interest-rate hikes. Market bets show waning faith in the ECB's hawkish stance enduring. Traders expect the Fed to cut rates by almost 90 basis points before 2023 is ove

May 5, 2023 . 8:48 AM

1 min read

ECB President Christine Lagarde insists on continuing monetary tightening despite the Federal Reserve's hint on a possible halt to interest-rate hikes.
Market bets show waning faith in the ECB's hawkish stance enduring.
Lagarde argues inflation risks remain significant, and the ECB's tightening cycle is less advanced, implying that euro-region banks can avoid financial turbulence in the US.
However, past experience suggests any divergence won't last, and traders expect the Fed to cut rates by almost 90 basis points before 2023 is over.
Overall, the ECB is set for more hikes, and a faster wind-down of its balance sheet was even a "hawkish surprise.".