European Central Bank President Christine Lagarde said she sees the ECB’s deposit rate at zero or “slightly higher” by the end of September, indicating an increase of at least 50 basis points from the current level.
Her comments sent the euro higher against the dollar as markets anticipated higher interest rate hikes this summer to fight record inflation.
“We will probably move to positive territory at the end of the third quarter,” Lagarde said in an interview with Bloomberg.
Asked to clarify this comment, he added: “When you are out of negative percentages you may be at zero, you may be just above zero. This is something we will determine based on our forecasts and guidelines.”
On Monday, Lagarde said the ECB would “abandon negative interest rates” by the end of September, something many investors thought would raise them to zero.
This was already considered a significant turning point for a central bank that has not raised interest rates for more than a decade, has been charging banks for their dormant funds for eight years and until recently ruled out interest rate hikes this year.
Markets are now expecting increases of about 64 basis points by the September 14 meeting and by 110 basis points by the end of the year.
Eurozone inflation for months was much higher than the ECB had expected, reaching a record high of 7.4% in April, forcing the central bank to follow its counterparts like the Federal Reserve in raising interest rates.
Lagarde, however, insisted that the ECB would move gradually, as inflation is driven by supply – a reference to more expensive fuels due to the war in Ukraine and restrictions on coronavirus in China – rather than a surge in demand.
“I do not think we are in a state of growing demand at the moment. It is definitely an inflation-driven supply-side of the economy,” Lagarde added.
Source: Capital
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
