The ECB has a credibility problem. It didn’t last year. Last year it was the Fed with the credibility problem. Today, it’s Christine Lagarde not Jerome Powell that needs to justify her policy.
Powell needed nearly a year after he began raising rates to get a significant portion of the market to believe he was serious about raising rates. Today, they don’t believe him if he making the odd dovish coo.
I don’t blame the market for its previous skepticism, it was well earned. But as I’ve pointed out many times, Powell’s incentives line up with his intentions and that has translated directly into Fed policy.
Lagarde has done the same thing, except she forgot that whole ‘incentives’ part. She has clearly tried to force her intentions onto the market to effect her masters’ policy.