“The European Central Bank (ECB) could end its stimulus program earlier than expected, but is unlikely to raise its main interest rate in July as investors expect“, the head of policy at the ECB told Reuters, Martins Kazaksduring the early hours of Monday in Europe.
Latvian Central Bank Governor Kazaks rejected market bets on a hike in July because this would imply a complete liquidation or “winddown” of ECB bond purchases before then, according to Reuters.
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July would imply an extremely fast and unlikely rate of reduction.
But in general, at the current juncture, naming a specific month would be too premature.
If we see inflation staying high and the labor market staying strong or getting even stronger, if we see the economy continuing to grow, the direction is clear: we can act sooner than we assumed in the past.
With the economy recovering, inflation at this level and the risk of inflation persistence increasing, new net asset purchases become less necessary.
Money markets have priced in a 15 basis point increase in the ECB’s deposit rate in July, plus an additional almost 40 basis points for December.
Source: Fx Street
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