Christine Lagarde, president of the European Central Bank, said interest rates for the first time in more than a decade could come in July but downplayed the idea of a half-point move amid concerns about economic expansion.
Respected for summer withdrawals with the growing contingent of governing councils, Lagarde told Dutch television that an increase could be delivered “weeks” after the end of the first quarter after the purchase of net bonds – according to ECB guidelines.
“We are going to follow the path of stopping the purchase of net assets,” he said. “Then, after a while – which could be a few weeks – interest rates could rise.”
ECB officials have become increasingly concerned about record inflation, choosing to focus on the dangers of fugitive prices amid concerns about renewed supply-chain problems involving Russia’s invasion of Ukraine and derailment of the epidemic rebound.
As a sign of inflation concerns, Klaus Knott of the Netherlands became the first member of the governing council this week to float the idea of a 50 basis-point move at the ECB’s July meeting, albeit only if the data was bad.
Asked about the potential increase in that size, Lagarde said, “This is not something I can tell you at the moment.”
“We need to make sure it’s getting slow enough so we don’t have to stop in this moving vehicle,” he said. “We must raise the accelerator to reduce inflation, but we can’t break any momentum.”
With inflation nearly four times the 2% target and the US Federal Reserve already rising higher than usual in April, critics have blamed the ECB – whose deposit rate is currently -0.5% – at a very slow pace. Lagarde disagreed.
“I can’t reduce the price paid for a loaf of bread at the moment because it has nothing to do with interest rates at the moment,” he said.
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