European Central Bank President Christine Lagarde has hinted that the Frankfurt-based institution could raise interest rates from record lows as early as July as eurozone inflation soars.
The ECB should end bond buying “early in the third quarter,” Lagarde said in a speech in Ljubljana, and then could raise interest rates “just a few weeks” later.
The comment is the clearest signal yet from Lagarde that the ECB is ready to change rates soon, as the institution lags behind the US Federal Reserve and other major central banks that have already given the move. step to combat inflation.
Policymakers at the ECB will meet on June 9 and July 21 to decide their course of action.
Any hike would be the ECB’s first in more than a decade and would lift rates from their current historically low levels.
These include a negative deposit rate that effectively charges banks to park their excess cash at the ECB overnight.
Inflation in the eurozone reached 7.5% in April, an all-time high for the currency club and well above the ECB’s own 2% target.
The surge, fueled in large part by sharp increases in energy prices due to Russia’s invasion of Ukraine, has strengthened calls for the ECB to follow its peers toward interest rate hikes.
The Federal Reserve and the Bank of England, among others, have been raising rates in an effort to stem price rises.
German central bank President Joachim Nagel said on Tuesday that he “will advocate a first step to normalize 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 fuel economic growth “in the third quarter.”
Earlier, ECB member and Bank of France director Francois Villeroy de Galhau told France Inter radio that the illusion of cost-free, unlimited debt is attractive but “very dangerous.”
France borrowed heavily during the Covid-19 pandemic to stabilize its economy, raising public debt from just under 100% of gross domestic product in 2019 to nearly 113% last year.