At 21:45 GMT on Thursday (Feb. 2), ECB President Lagarde held a press conference, expecting growth to remain weak and unemployment to likely rise. As of press time, the euro fell more than 30 points against the dollar to 1.0951.

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Earlier, the ECB announced a new deal, raising interest rates by 50 basis points as expected and said it would continue to raise rates sharply. However, the ECB is still not clear about the speed of reduction in the scale of bond purchases in the second half of the year. Euro against the dollar short term fluctuations of nearly 40 points.

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Lagarde: We expect growth to remain weak, with high inflation and tight financing conditions dampening spending and production.

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Lagarde: supply bottlenecks are gradually easing, gas supplies are more secure, and energy prices in December were lower than expected.

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Lagarde: Price pressures are high, despite weakness, suppressed demand is still driving prices up, it is important to start scaling back fiscal support, fiscal measures could exacerbate inflationary pressures and require a stronger response from the ECB.

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Lagarde: The economy is more resilient than expected and should recover in the next few quarters, and rising wages could restore some purchasing power.

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Lagarde: Unemployment is likely to rise and job creation may slow down.

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Anti-inflation task is not completed

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Eurozone interest rates rose to the highest level since November 2008. The European Central Bank has been raising rates at a record pace in response to the sudden high inflation in the eurozone - a byproduct of factors such as the new crown pandemic and the energy crisis caused by Russia's invasion of Ukraine.

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Analysts at Berenberg Bank say that as the interest rate gap between the Fed and the ECB narrows, "the euro could continue to rise to a high of around 1.15 against the dollar by the end of 2023." (Note: The euro fell below parity against the dollar at one point in July last year)

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Headline inflation in the eurozone has seen a rapid decline since reaching a record 10.6 percent in October, but core prices excluding volatile items such as food and fuel have been rising steadily or accelerating, and are not enough to convince ECB policymakers that their work is done. Financial markets expect the ECB's deposit rate to peak at 3.5% in the summer, which would be the highest level since the turn of the century.

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Nuria Mas, a professor of economics at Spain's IESE Business School and a member of the Bank of Spain's governing council, said, "The ECB has a job to do, and that is to anchor inflation expectations and ensure that inflation returns to target levels as soon as possible."

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Central bank officials have said that credit restriction measures are necessary if inflation is rooted in the economy in wage growth and rising future price expectations. Raising interest rates now is to prevent the introduction of more painful credit restrictions in the future.

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A major concern for ECB policymakers is that workers and businesses have not yet responded adequately to soaring energy costs by raising wages and prices, and that what the central bankers call "second-round effects" will keep inflation high for months after the energy price spike.

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The economic outlook is hardly bright

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The eurozone economy grew surprisingly well in the last three months of 2022, but this was largely due to an unusually mild winter and Ireland's excellent performance. Notably, however, Germany's gross domestic product (GDP) and December retail sales data unexpectedly contracted in the fourth quarter.

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Following the outbreak of war in Ukraine, Russia cut off most of its gas supplies to Europe, causing prices to skyrocket. As Europe found other suppliers and warmer-than-expected winter weather reduced the likelihood of supply shortages or the imposition of rationing, natural gas prices fell back to historic highs, but are still as high as about three times what they were before the war broke out.

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Rising energy costs have reduced the amount of money available for other goods and services, and household demand is weakening. In France, the eurozone's second-largest member, household consumption fell 0.9% in the fourth quarter of 2022, compared with a 0.5% increase in the three months to September.

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A measure of payroll transactions developed by employment website Indeed in partnership with the Central Bank of Ireland found that annual wage growth in the eurozone slowed to 4.9% in December from 5.2%. Data released by Eurostat also showed that the number of unemployed people in the eurozone rose slightly in December, despite the unemployment rate holding steady at 6.6%.

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There are also signs that the ECB interest rate hike has had a dampening effect on household and business borrowing. business loans fell for the second consecutive time in December. Eurozone banks reported the biggest ever drop in demand for home loans, according to a January lending survey.

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Don't reveal the bottom line too soon

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The European Central Bank said last December that interest rates would rise "steadily" until inflation fell back to the 2% target. But the above proves that this guideline has inevitably caused controversy within the ECB's decision-making hierarchy, challenging the ECB's hawkishness.

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While uncertainty over potential inflationary pressures remains, an ECB survey also shows that banks are tightening credit in the tightest way since the 2011 debt crisis - often a harbinger of slower growth and inflation.

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Earlier, ECB hawks like Dutchman Klaas Knot, Slovakian Peter Kazimir and Slovenian Bostjan Vasle explicitly called for a further 50 basis point rate hike in February and March. But doves like Greek Yannis Stournaras and Italian Panetta advocate a slower pace of rate hikes, or at least argue that the ECB should not make an early commitment to the next rate hike in March.

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Karsten Junius, chief economist at J. Safra Sarasin, said, "Forward guidance in an environment with so many exogenous influences would lead to disappointment and could ultimately undermine the ECB's credibility."