The vice-president’s declarations pave the way for an increase in key rates, which he considers possible, “from the current perspective, in July or September.
The European Central Bank (ECB) “should” end its net debt purchase program as of July, its vice-president said on Thursday, paving the way for an increase in key rates, maintained at historically low levels despite the ‘inflation.
The net purchase of assets, the main instrument of monetary support for the economy, “should end in July”, said Luis de Guindos in an interview with the Bloomberg agency.
The ECB has officially set the course for the third quarter of 2022 to stop buying new bonds on the markets. July is therefore the first possible deadline.
The Frankfurt institution is under pressure to start raising its rates, a movement already largely initiated by the other major central banks in the world, in an attempt to stem the soaring prices accentuated by the war in Ukraine.
In the eurozone, inflation hit a record 7.5% in March, well above the ECB’s medium-term target of 2%.
The timing of the first rate hike will depend on projections to be released at the ECB’s next meeting on June 9, de Guindos said.
“From the current perspective, July is possible and September, or later, is also possible,” said Mr. de Guindos, widely seen as one of the governing council members most supportive of accommodative monetary policy.
Supporters of tightening
Central banks are using rate hikes as a tool to try to tame inflation, but pulling the trigger too soon risks hurting growth at a sensitive time for the European economy, weakened by geopolitical tensions.
In the sequence planned by the ECB, a rate hike – the first since 2011 – is supposed to take place “some time after” the end of debt purchases, without further details.
Within the Governing Council, supporters of a rapid tightening of monetary policy are increasingly vocal, fearing that the ECB will act too late and can do nothing more to stem the rise in prices.
Among these “hawks”, the head of the German Central Bank Joachim Nagel again worried on Wednesday about an uncontrolled rise in prices and pleaded for a weaning as fast as possible.
“We should complete the asset purchases at the end of the second quarter. At the beginning of the third quarter at the earliest, we could expect the first movements on the rates”, he indicated during a trip to Washington.