Christine Lagarde refused to rule out a rate hike this year in response to the ECB’s “unanimous concerns” over price surges, adding to investor fears that the ECB will raise borrowing costs several times in 2022. bet.

Annual consumer prices rise in euro zone, says ECB president A record 5.1% in January. She dropped earlier comments downplaying the chance of the bank raising interest rates in 2022 because “the situation has changed,” saying it was “closer and closer” to hitting its inflation target.

Lagarde said ECB policymakers had reached a “consensus” on a decision to keep interest rates unchanged this year and reduce bond purchases “gradually”. But a person familiar with the committee said “one or two” of its members called for immediate tightening.

Responding to Lagarde’s comments at a press conference after the ECB Governing Council met on Thursday, Investors up the ante The central bank will be forced to reverse course this year and raise interest rates several times.

Konstantin Veit, a portfolio manager at Pimco, said the ECB’s “hawkish message” indicated a “more openness to an early withdrawal of monetary policy support”.

The euro rose to a more than two-week high against the dollar, Euro zone bonds sell off That intensified after Lagarde refused to explicitly rule out a rate hike this year. The single currency rose 1.2 percent to $1.143.

The yield on Germany’s 10-year bond, the benchmark for financial assets across the euro zone, surged to a near three-year high of 0.14%. Traders have ramped up bets on higher rates, with the market pricing in its deposit rate from minus 0.5% to minus 0.1% by December after Lagarde’s press conference.

While the ECB kept policy on hold, Lagarde’s remarks were widely interpreted as suggesting a shift to tighter monetary policy could be possible as early as March.

Carsten Brzeski, head of macro research at ING, said Lagarde’s “hawkish setback” “opens the door for an accelerated reduction in asset purchases and rate hikes this year”.

Lagarde said there was “unanimous concern at the Governing Council meeting about the impact of inflation on Europeans” and their “day-to-day difficulties of having to put up with higher prices”.

She said the ECB would stick to its already announced “sequence” of raising rates after net purchases were halted, adding that the Governing Council would “do everything gradually” and “not in haste.”

But she raised expectations that the ECB will raise inflation expectations again at its next policy meeting in March, raising it to its 2 percent target over the next two years and causing its stimulus to be withdrawn faster than planned.

That could lead it to speed up plans to halt net asset purchases in preparation for the first increase in deposit rates in more than a decade.

Frederik Ducrozet, a strategist at Pictet Wealth Management, said Lagarde had done a “reality check” on the bond market. “Risk scenarios are now clear: March staff forecast sharply revised up, net asset purchases ending Q3 tapered faster, interest rates [rise] in the fourth quarter of 2022,” he added.

Higher-than-expected inflation has already caused the Fed and Bank of England to turn to more ‘Hawks’ policy stance. Bank of England up It raised its main policy rate to 0.5% on Thursday, less than two months away from a hike to 0.25%, while investors Pricing The Fed has raised interest rates five times this year.

Italian 10-year bond yields rose 20 basis points to 1.66% after the ECB press conference, the highest level since May 2020. “The ECB is opening a potentially huge hole for Italians,” said James Athey, investment director at abrdn. Bonds fall. “