The European Central Bank (ECB) is likely to start raising interest rates in July, coming out of the negative by the end of September, said President Christine Lagarde, according to Bloomberg.
“I expect that the net purchases under the APP will end very early in the third quarter,” she said on Monday.
“This would allow us to raise interest rates during our meeting in July. Given the current outlook, it is likely that we will be able to get out of negative interest rates by the end of the third quarter.”
With inflation running at almost four times the ECB’s 2% target, the central bank’s Governing Council has the potential to raise interest rates from its current level of -0.5% in July.
Lagarde’s statements suggest two 25-point increases in each of the July and September monetary policy meetings.
While the head of the central bank of the Netherlands Klaas Knot last week referred to the possibility of raising interest rates by half a unit, if necessary, Lagarde has repeatedly stated that the normalization of policy will be gradual and reiterated this view on Monday.
“It makes sense to go step by step, looking at the impact on the economy and the outlook for inflation as interest rates rise,” Lagarde said.
Lagarde said the ECB would also be able to “design and use new instruments” to ensure that monetary policy is properly implemented in the eurozone.
The first rate hike in more than a decade has raised concerns about a possible fragmentation of the bond market in the 19 members of the monetary bloc.
Source: Capital
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