ECB Forum: Interest-rate hiking cycle isn't done yet, central bankers say

  • Central bank bosses discussed monetary policy collectively in ECB forum.

  • Divergence on recent monetary policy between Fed, ECB, BoE and BoJ paved the way for interesting comments.

  • Jerome Powell reminded markets of their willingness to cling to tight monetary policy.

Jerome Powell, Chairman of the Federal Reserve System (Fed) and Christine Lagarde, European Central Bank (ECB) President, spoke at the 2023 ECB Forum on Central Banking. Alongside Powell and Lagarde, Bank of England Governor (BoE) Andrew Bailey and Bank of Japan (BoJ) Governor Kazuo Ueda also took part at the same panel and responded to questions on a variety of topics including policy outlook, inflation, labor market and financial conditions.


The Fed left its policy rate unchanged at the range of 5%-5.25% following the June policy meeting but left the door wide open for a return to a 25 basis points (bps) rate hike in July. The ECB raised key rates by 25 bps in June and Lagarde noted that it is very likely the case that the ECB will continue to hike rates in July. In an unexpected decision, the BoE lifted its policy rate by 50 bps to 5% in response to strong wage inflation and Consumer Price Index (CPI) figures recorded in May. Finally, the BoJ maintained its loose policy settings in June but experts think the BoJ could review its Yield Curve Control strategy as early as next month for a possible tweak later this year.

Powell: No reason to change speed of balance sheet adjustment right now

Ueda: "Some smaller, regional Japanese banks are sitting on non-negligible amounts of valuation losses."

Lagarde: "We are looking to complete our operational framework review in the next 6-9 months.

Powell: "I don't see anything that would make us want to adjust speed of balance sheet adjustment right now."

Powell: "I don't see us getting back to 2% inflation this year or the next; I see us making progress."

Powell: Watching commercial real estate very carefully

These are the main takeaways from ECB forum Q&A sessions in Sintra:

Bailey: "It would not be the right thing to do to change the inflation target."

Bailey: "Market doesn't think we are not nearly done at the moment."

Powell: "US economy is quite resilient and latest data are consistent with that."

Powell: "Inflation proved to be more persistent than expected."

Powell: "Watching commercial real estate very carefully."

Powell: "Commercial real estate worries played no part in June decision."

Powell: "We don't target particular parts of the market."

Lagarde: "Transmission of policy is likely to be less rapid than in the past due to fixed rate mortgages."

Lagarde: "We may have underestimated the resilience of our economies."

Ueda: "We're seeing signs of inflation expectations rising but they not fully in line with the inflation target."

Powell: Economic downturn not the most likely case

Ueda: "Still some distance to go in sustainably achieving 2% inflation accompanied by sufficient wage growth."

Ueda: "Economy is going to expand slightly above potential for some time."

Bailey: "Brexit is not part of a strong labor market story."

Lagarde: "We are not seeing enough tangible evidence of falling underlying inflation."

Lagarde: "Second quarter was not great for manufacturing."

"Lagarde: "Manufacturing does not give great hope for a strong recovery."

Powell: "There is significant disinflation in pipeline from rents but it will take time."

Powell: "We need to see more softening in labour market."

Powell: "We're getting the softening we need but slower than expected."

Powell: "Significant probability is we get a downturn but it's not the most likely case."

Powell: We believe there's more restriction coming, driven by labor market

Lagarde: "We still have ground to cover."

Lagarde: "If the baseline stands, we know we will likely hike again in July."

Bailey: "UK economy turned out to be much more resilient."

Bailey: "Data showed clear signs of persistence of inflation."

Bailey: "We will do that is necessary to get inflation to target."

Powell: "Policy hasn't been restrictive for very long."

Powell: "We believe there's more restriction coming, driven by labor market."

Powell: "Strong majority for two more rate hikes in dot plot."

Powell:  "As you get closer to target, you're closer to a place where risks become more in balance."

Powell: "Wouldn't take moving at consecutive meetings off the table."

About Jerome Powell (via

"Jerome H. Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed to the office and sworn in for a second four-year term on May 23, 2022. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body. Mr. Powell has served as a member of the Board of Governors since taking office on May 25, 2012, to fill an unexpired term. He was reappointed to the Board and sworn in on June 16, 2014, for a term ending January 31, 2028."

Interest rates FAQs

What are interest rates?

Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%.
If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.

How do interest rates impact currencies?

Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.

How do interest rates influence the price of Gold?

Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank.
If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.

What is the Fed Funds rate?

The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure.
Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.


Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content

Recommended content

Editors’ Picks

EUR/USD stays below 1.0700 after upbeat US PMI data

EUR/USD stays below 1.0700 after upbeat US PMI data

EUR/USD stays on the back foot and trades in negative territory below 1.0700 as the US Dollar benefits from upbeat data in the American session. S&P Global reported that the economic activity in the US private sector continued to expand at a robust pace in June.


GBP/USD drops to fresh multi-week low below 1.2650

GBP/USD drops to fresh multi-week low below 1.2650

GBP/USD remains under bearish pressure and trades at its lowest level since mid-May below 1.2650. The stronger-than-forecast Manufacturing and Services PMI data from the US helps the USD hold its ground and causes the pair to stretch lower.


Gold drops below $2,340 as US yields rebound

Gold drops below $2,340 as US yields rebound

Gold loses its traction and trades deep in the red below $2,340 in the second half of the day on Friday. The benchmark 10-year US Treasury bond yield pushes higher following the upbeat PMI data from the US, weighing on XAU/USD.

Gold News

Bitcoin retraces to crucial support

Bitcoin retraces to crucial support

Bitcoin price encounters resistance at weekly highs before retracing to seek support at a crucial level, while Ethereum and Ripple align closely with Bitcoin's movements, gearing up to surpass resistance barriers and embark on upward rallies.

Read more

Week ahead – US PCE inflation the highlight of a relatively light agenda

Week ahead – US PCE inflation the highlight of a relatively light agenda

Core PCE inflation to test bets of two Fed rate cuts in 2024. Yen awaits BoJ Summary of Opinions, Tokyo CPI. Canadian CPI data also enters the spotlight.

Read more