De Guido: Rise in interest rates, but not unlikely by ECB in July

An increase in the European Central Bank’s interest rates in July is unlikely to happen without such a thing being ruled out permanently, said Vice President Luis de Guidos, as reported by Bloomberg.

“There is no reason why the termination of the asset purchase program (APP) should not happen in July,” de Guidos told the Spanish newspaper El Correo in an interview published today.

“Interest rates will rise after that and it can happen in” months, weeks or days. July is a possible month, but that does not mean it will happen then, “he said.

Faced with record inflation in the eurozone, some policymakers are pushing for the first ECB rate hike in more than a decade to take place in July. Any decision “will depend on the data and the new macroeconomic forecasts for June,” he said.

Unwilling to anticipate these forecasts, the ECB Vice President said that “a significant slowdown in growth” is already being felt.

“Even so, in 2022 growth will be positive,” he said. “And if we insist on the technical definition of recession – two consecutive quarters of negative growth – at the moment this is something we do not see.”

“So far, we have not seen wage increases that would put the ECB ‘s 2% target at risk in the medium term, but we have to be very careful, because this is a belated indicator,” he said.

“Nominal interest rates on public debt have risen around the world, but risk premiums remain relatively stable. The risk of fragmentation has not materialized,” he added.

“With these levels of inflation, interest rates will not be as low as they have been in recent years, and governments need to be prepared for that. The key, also in terms of markets, is to have credible proposals.”