Eurozone economic growth resilience exceeds expectations! Lagarde predicts: outlook may be raised again next week

European Central Bank President Lagarde stated that the bank is likely to give a more optimistic assessment of the economic growth outlook in its latest forecast report to be released next week. In a speech, Lagarde pointed out that the euro area, consisting of 20 countries, has shown more resilience than expected in the face of the trade impact from the United States. She specifically noted that the EU did not implement retaliatory measures, the euro exchange rate remained stable, and the labor market continued to be strong. Lagarde said in her speech on Wednesday: "In the most recent economic forecast work, we have already raised growth expectations. I expect that the forecast for December may be raised again." As a result of the above remarks, eurozone bond prices fell in response, with the yield on French 10-year government bonds rising to over 3.60% at one point, reaching a nine-month high, before quickly narrowing. Market expectations for a 25 basis point rate hike by the European Central Bank next year have risen from 30% on Tuesday to 40%. Due to the strong performance of the economy, European Central Bank policymakers are increasingly confident that the benchmark interest rate can remain unchanged in the foreseeable future. Eurozone GDP grew by 0.3% in the third quarter, higher than initial estimates. Gediminas Simkus, Governor of the Bank of Lithuania, stated on Wednesday that he believes there is no need for further rate cuts. This statement represents a shift from his previous stance, indicating that policymakers increasingly believe that inflation will not significantly drop below the European Central Bank's target range. European Central Bank Executive Board member Isabel Schnabel also expressed approval of investors betting on the central bank's next move being a rate hike. The series of statements by officials have completely dispelled expectations of a rate cut by the European Central Bank next year among investors. This market sentiment has spread globally, with expectations of a multi-country rate cut cycle from the United States to Australia nearing its end, leading global bond yields to rise to levels not seen since 2009. Lagarde stated: "Considering that the inflation rate has stabilized at around 2%, and medium-term forecasts also point to 2%, I want to reiterate that we are in an ideal policy range." She also noted that the eurozone economy is "very close to its potential growth level." Responding to French President Macron's proposal that "eurozone monetary policy should adjust its framework to balance inflation with economic growth and employment," Lagarde also made a statement. Unlike the Federal Reserve's multiple policy goals, maintaining price stability is the core mission of the European Central Bank. Lagarde said: "This is a discussion worth having, and exploring the possibility of modifying relevant treaties is also meaningful." But she also emphasized that the current policy framework gives the European Central Bank ample space to incorporate considerations of economic growth, employment, innovation, productivity, and climate change into its decision-making. She stated: "Governments initially entrusted central banks with the mission of maintaining a specific currency order, and the responsibility of central banks and their decision-makers is to focus on fulfilling this core goal. And our policy mission is very clear." Furthermore, Lagarde positively evaluated the latest proposal by the EU to use frozen Russian assets to aid Ukraine's defense. She pointed out that the currently being negotiated proposal is "the most compliant with international law standards that I have seen." She emphasized: "If we can clearly articulate our current position, I believe that euro asset and European market investors will understand that this is not about arbitrarily depriving others of their property or disposing of sovereign assets for our own benefit, but rather a very special case."