The ECB president calculates that interest rates will no longer be negative from September
There has been no need to wait for a Governing Council of the European Central Bank (ECB) to know the monetary institution’s final decision on interest rate hikes in the eurozone. Her chair, Christine Lagarde, pointed out this morning that the entity’s meeting, scheduled for next July, is the right time to implement the eurozone’s first rate hike in more than a decade. “I expect net purchases under the APP (program) to end very early in the third quarter. This would allow us to raise interest rates at our meeting in July, in line with our future orientation,” the Frenchwoman said in an article on the ECB’s blog.
Lagarde’s words were surprising given the format in which she announced this foreseeable decision by the ECB over the internet, even after trying to silence some of its council about when they would start raising rates in the eurozone.
He has even revealed more details before the end of the year. The institution’s president points out that, based on the current perspective, it is likely that the entity will be able “to get out of negative interest rates by the end of the third quarter.” In his view, the noticeable upward shift in the inflation outlook makes it appropriate to adjust nominal variables, and so do interest rates.
“This would not be a tightening of monetary policy; instead, leaving key rates unchanged in this environment would mean policy easing, which is currently unjustified.”
In any case, Lagarde emphasizes that the next phase of normalization of the ECB’s monetary policy should be guided by the development of the medium-term inflation outlook. “If we see inflation stabilizing at 2% over the medium term, a further gradual normalization of interest rates towards neutral interest rates is appropriate,” warns that the overall pace and size of the adjustment cannot be predetermined.
Inflation in the eurozone has been skyrocketing for several months, in a maelstrom that has intensified even more after the outbreak of the war in Ukraine. In April, the year-on-year rate was 7.4%, with countries like Spain above 8%.
If interest rates rise even half a point for the rest of the year, mortgages will start to rise the further they go. These will be on average between 170 and 350 euros per year.
However, Lagarde has warned that the situation is currently complicated by the presence of negative supply shocks, creating more uncertainty about the speed at which current price pressures will ease, the evolution of overcapacity and the extent to which inflation expectations will persist. anchored to our purpose.
“In such a scenario, there are arguments for gradualism, optionality and flexibility in adjusting monetary policy,” he says.
In this regard, Lagarde reiterates that, if necessary, the ECB can design and deploy new tools to ensure the transmission of monetary policy towards normalisation.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
