The European Central Bank could end the stimulus program earlier than planned, but it is unlikely to raise the key interest rate in July as investors expect, said ECB member Martins Kazaks.
Investors expect the ECB’s first rate hike in more than a decade to come sooner, as Bank President Christine Lagarde ruled out such a move and acknowledged the accumulated inflationary risks.
But Kazaks, who is governor of Latvia’s central bank, amused the impressions of a move in July, as it would signal a full tapering of bond markets before that date.
“July would mean an extremely rapid decline. But overall, in the current context, giving a specific date from now on would be too early,” he added.
The ECB has long said it will end bond purchases “just before” the deposit rate hike of -0.5%, and Lagarde and its partners have reaffirmed this commitment in recent days.
Asset purchases are expected to continue at least until October, although sources told Reuters that the ECB is likely to bring earlier this date, at the March 10 meeting.
With eurozone inflation hitting a record 5.1% in January, more than double the ECB ‘s 2% target, Kazaks is also positive about action.
“If we see that inflation remains high and the labor market is strong or further strengthened, if we see that the economy continues to grow, the direction is clear: we can act sooner than we thought in the past,” Kazaks said.
Source: Capital
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