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The ECB is pushing to catch up when it comes to normalization

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(Kitco News) - The latest comments from the ECB president Lagarde continue to suggest the central bank remains firmly behind the curve. The central banker said that the ECB's inflation projections are increasingly pointing towards inflation being on target over the "medium term. In addition to this, she noted that the ECB's inflation expectations are at or above 2% which they have been for some time.

Lagarde did talk about the future path of the policy. She said that normalization will be gradual after the first rate hike. Adding that it is her expectation that the Asset Purchasing Programme (APP) should be concluded early in the third quarter. Something that the markets had already been pricing in. She also maintained that the first-rate hike could be weeks after bond-buying ends.

Lagarde was not the only ECB member to speak today. The Slovenian central bank Governor Vasle said "What started as a one-off shock has now become a more broad-based phenomenon," when speaking about inflation. He added Vasle further noted that he is in favor of the ECB taking further and faster action to tame inflation and when the circumstances change, the policy response must follow.

In terms of a reaction to these comments, EUR/USD and the DAX have both moved higher today. This would suggest that the market has been eased and none of the comments have been taken too drastically. European equities could have fallen if the market felt that policy normalization was coming to far and too fast. EUR/USD moved higher even though Bunds have come off this morning soo far. This suggests again that the markets are noting


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