ECB’s Blunt Press Statement Today Screams One Big Idea, Stagflation Has Arrived – Mish Talk

ECB Press Conference 

Today the ECB hiked rates by three-quarters of a point. 

Let’s tune into the the ECB’s Press Conference hosted by Christine Lagarde, President of the ECB and Luis de Guindos, Vice-President of the ECB.

Key Statements, Emphasis Mine

• The Governing Council today decided to raise the three key ECB interest rates by 75 basis points. This major step frontloads the transition from the prevailing highly accommodative level of policy rates towards levels that will ensure the timely return of inflation to our two per cent medium-term target. Based on our current assessment, over the next several meetings we expect to raise interest rates further to dampen demand and guard against the risk of a persistent upward shift in inflation expectations.
• Inflation remains far too high and is likely to stay above our target for an extended period. According to Eurostat’s flash estimate, inflation reached 9.1 per cent in August. Soaring energy and food prices, demand pressures in some sectors owing to the reopening of the economy, and supply bottlenecks are still driving up inflation. 
• Price pressures have continued to strengthen and broaden across the economy and inflation may rise further in the near term.
• Very high energy prices are reducing the purchasing power of people’s incomes and, although supply bottlenecks are easing, they are still constraining economic activity. In addition, the adverse geopolitical situation, especially Russia’s unjustified aggression towards Ukraine, is weighing on the confidence of businesses and consumers.
• While buoyant tourism has been supporting economic growth during the third quarter, we expect the economy to slow down substantially over the remainder of this year. 
• While supply bottlenecks have been easing, these continue to gradually feed through to consumer prices and are putting upward pressure on inflation, as is recovering demand in the services sector. The depreciation of the euro has also added to the build-up of inflationary pressures.
• In the context of the slowing global economy, risks to growth are primarily on the downside, in particular in the near term. As reflected in the downside scenario in the staff projections, a long-lasting war in Ukraine remains a significant risk to growth, especially if firms and households faced rationing of energy supplies.
• Summing up, we raised the three key ECB interest rates by 75 basis points today, and expect to raise interest rates further, because inflation remains far too high and is likely to stay above our target for an extended period.