Sintra speeches as a guide to policy

Comparing Lagarde's speeches one year apart is a revealing exercise

• Lagarde’s introductory speech at Sintra each June takes the pulse on the latest thinking inside the ECB;

• Last year’s speech emphasised the importance of gradualism while retaining optionality—in the end, the latter won and rates jumped far more than markets expected;

• This year’s speech notes the importance of rate persistence given inflation prospects.

This year’s annual shindig of ECB officials in Sintra, Portugal, has begun and hence provides an opportunity to look back on what a remarkable year it has been for monetary policy in the Eurozone.

Contrasting the speeches President Lagarde that bookend this period is a useful exercise.

Let’s step back one year.

Looking back one year

Lagarde’s opening speech at last year’s gathering emphasised the “principles of gradualism and optionality… [which] means moving gradually if there is uncertainty about the outlook, but with the option to act decisively on any deterioration in medium-term inflation, especially if there are signs of a de-anchoring of inflation expectations.”

Lagarde’s opening speech.