Record inflation: ECB officials send signals for rate hike in July

2022-04-21T13:26:40.563Z

Record inflation: ECB officials send signals for rate hike in July Created: 04/21/2022, 15:18 The key interest rate in the currency area of the 19 countries has been at a record low of zero percent for around six years now. © Daniel Karmann/dpa High inflation in the euro zone is putting a strain on consumers' budgets and eroding savings. The first rate hike by the European Central Bank could

Record inflation: ECB officials send signals for rate hike in July

Created: 04/21/2022, 15:18

The key interest rate in the currency area of the 19 countries has been at a record low of zero percent for around six years now.

High inflation in the euro zone is putting a strain on consumers' budgets and eroding savings.

The first rate hike by the European Central Bank could come as early as summer.

Frankfurt/Main – In view of the record inflation, the likelihood of a first rate hike in the euro area this summer is growing.

Several members of the top decision-making body of the European Central Bank (ECB) did not rule out an increase in July.

"I see no reason why we shouldn't phase out our asset purchase program in July," ECB Vice President Luis de Guindos said in a published interview with Bloomberg news agency.

From today's perspective, a rate hike in July is also possible.

ECB interest rate hike: Decision dependent on data

However, the Vice President also believes that an interest rate hike will only be possible in September or later and made it clear that the decision would depend on the data situation.

ECB Council member Pierre Wunsch made a similar statement.

A rate hike in July is "certainly a scenario that I would consider," said the governor of the Belgian central bank, also in a Bloomberg interview.

The prerequisite, however, is “another inflation surprise”.

According to the latest data, the inflation rate rose to 7.4 percent in March, the highest level since the introduction of the euro.

Inflation is thus well above the target set by the ECB.

The central bank is aiming for an inflation rate of two percent in the medium term, at which it sees price stability.

Inflation is fueled above all by high energy prices, which have risen rapidly because of the Ukraine war.

The first rate hikes are possible at the beginning of the third quarter

Bundesbank President Joachim Nagel had already said on Wednesday that the ECB could raise interest rates as early as the summer in view of the high level of inflation.

The first rate hikes are possible at the beginning of the third quarter, said Nagel on the fringes of the spring conference of the International Monetary Fund in Washington.

That would be in July.

Martins Kazaks, ECB Governing Council member and Governor of the Central Bank of Latvia, also believes a rate hike in July is possible.

Europe's currency watchdogs have committed themselves to only raising interest rates when they are no longer putting fresh money into buying government and corporate bonds.

The central bank recently announced an end to net purchases in the third quarter.

At the meeting in June, the Governing Council will decide on the end of the purchase program and the future interest rate path, ECB President Christine Lagarde said last week after the most recent Council meeting.

The new economic and inflation forecasts will also be available in June.

The key interest rate in the currency area of the 19 countries has been at a record low of zero percent for around six years now.

Banks that park funds at the ECB have had to pay interest on them since June 2014. This deposit rate is currently minus 0.5 percent.

Although allowances for certain sums are intended to relieve the institutes of the costs, more and more financial institutions are passing the negative interest rates on to their customers.

dpa