ECB’s Lagarde Says Risks to Inflation Outlook Tilted to Upside

ECB President Lagarde stated that risks to the inflation outlook are skewed to the upside, reinforcing a cautious stance on monetary policy easing. This signals that persistent price pressures could delay rate cuts, tightening the expected policy path and supporting the euro through improved rate differentials. Eurozone bond markets, particularly German bunds, face upward pressure on yields as inflation repricing reduces appetite for duration. The euro and front-end interest rate swaps are most exposed, with traders adjusting expectations for the timing of ECB rate cuts. The next key catalyst will be the May 30 release of final May CPI data, which will clarify whether inflation momentum is sustaining or cooling.

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