The President of the European Central Bank said, Christine LagardeOn Monday, the central bank said it would likely end the era of negative interest rates by September, as the euro zone faces rising inflation.
Lagarde wrote in a blog post that the ECB “will likely be in a position to exit negative interest rates by the end of the third quarter.”
In the words of Lagarde, the bond-buying program will first be terminated “very early in the third quarter”, paving the way for “a rate hike at our July meeting”.
The increase would be the ECB’s first in more than a decade and would raise interest rates from their current, historically low levels.
This includes a negative 0.5% deposit rate, which effectively charges banks for depositing their excess funds with the European Central Bank.
Lagarde has come under increasing pressure from her colleagues in the Central Council to raise interest rates at the earliest, with inflation rising in the eurozone.
Consumer prices rose by 7.5% in the Eurozone during April, the highest level ever for the region, and well above the Bank’s 2% target.
The factor behind the rally was the rise in energy prices due to the Russian invasion of Ukraine, which prompted other central banks to raise interest rates, as the US Federal Reserve increased interest rates by an unusual 50 basis points, at the beginning of May.
Lagarde said any increases beyond zero would depend on “inflation expectations”.
European Central Bank policy makers will decide the rate path at the June 9th and July 21st meetings.
