Summer ECB interest rate hike?: Lagarde predicts interest rate change soon

According to ECB boss Christine Lagarde, the key interest rate in the euro area could rise again for the first time in the summer, after more than six years of zero interest rate policy. The possibility of increase in July is believed to be more.

ECB boss Christine Lagarde has announced a significant increase in interest rates for the summer. The president of the European Central Bank (ECB) in the Slovenian capital Ljubljana said the hike could come weeks after bond purchases ended. The end of the purchase is planned for the beginning of the third quarter.

Inflation puts the central bank under severe pressure

Lagarde said that after the initial rate hike, further increases should be gradual. The French woman pointed to inflation, which is likely to remain high for some time. Inflation rose to 7.5 per cent in April. This was the highest level since the introduction of the euro.

Other ECB representatives have previously spoken of a possible interest rate hike in July – such as ECB director Frank Alderson. Bundesbank President Joachim Nagel called for an early change in monetary policy. It should be avoided that prices and wages constitute each other. “In any case, the exit from monetary policy, which is very stimulating to the economy, must be quick and smooth,” demanded the head of the Bundesbank. He also named July as a likely date for a hike in the key ECB interest rate.

Zero interest since 2016

The ECB reduced the prime interest rate to zero in March 2016 and has remained unchanged since then. The deposit rate at which banks can deposit money in ECB is minus 0.5 per cent. Institutions have to pay for it – which is why they often bear the cost Custody fee and negative interest to customers continue. yesterday However, ING announced early termination of penalty interest For the vast majority of customers.

Other western central banks have already raised their interest rates – such as central banks. in the United States and Great Britain.