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Christine Lagarde suggests ECB rate hike could come as soon as July

The comment is the clearest sign yet from Lagarde that the ECB is ready to move on rates soon rather later, as the institution trails behind the US Federal Reserve and other major central banks that have already taken the step to combat inflation.

May 11, 2022 / 02:25 PM IST
ECB President Christine Lagarde. (PC-AFP)

ECB President Christine Lagarde. (PC-AFP)

European Central Bank president Christine Lagarde hinted Wednesday the Frankfurt-based institution could raise its interest rates from historic lows as soon as July as inflation in the eurozone soars.

The ECB should end its stimulus bond-buying scheme "early in the third quarter", Lagarde said in a speech in Ljubljana, and could then raise interest rates "only a few weeks" later.

The comment is the clearest sign yet from Lagarde that the ECB is ready to move on rates soon rather later, as the institution trails behind the US Federal Reserve and other major central banks that have already taken the step to combat inflation.

ECB policymakers will next meet on June 9 and July 21 to decide their course of action.

Any hike would be the ECB's first in over a decade and would lift rates from their current historically low levels.

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These include a negative deposit rate which effectively charges banks to park their excess cash at the ECB overnight.

Inflation in the eurozone reached 7.5 percent in April, an all-time high for the currency club and well above the ECB's own two-percent target.

The surge, driven in no small part by steep increases in prices for energy due to the Russian invasion of Ukraine, has strengthened calls for the ECB to follow its peers towards interest rate hikes.

The Fed and the Bank of England among others have been raising rates in efforts to stop price rises.

German central bank president Joachim Nagel said Tuesday he "will advocate a first step normalising ECB interest rates in July".

At its last meeting in April, the ECB's governing council resolved to end a bond-buying scheme that has been used to stoke economic growth "in the third quarter".



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AFP
first published: May 11, 2022 02:12 pm
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