Concern about high inflation in the euro area, chief European Central Bank (ECB)Christine Lagarde, this Wednesday that the central bank’s board of governors may raise benchmark interest rates as early as the beginning of summer, after a few weeks Ending the public debt purchase program.
in a letter In the Slovenian Central BankIn Ljubljana, Lagarde stressed that the rate increase process would be gradual. Leader of the Board of Governors As there is still no consensus on the way forward – in the group that decides monetary policy, there are those who advocate raising interest rates to prevent inflation from becoming permanent and those who demand more caution to stop the economy from entering a recession in the current context of war – Lagarde has now indicated that the decision to raise interest rates may be closer.
Although he did not say what month it would happen and stated that this decision had not yet been made, Lagarde hinted that this could happen at the meeting of the Board of Governors on July 21 and not at the next meeting, on September 8.
First, we will end net purchases under the asset purchase program. Judging by the available data, I expect that [as aquisições] To be completed at the beginning of the third quarter. The first rate hike, in line with the ECB’s forward rate guidance, will be raised sometime after the end of net asset purchases. We haven’t exactly defined the concept of “some time” yet, but I was very clear [em dizer] This may only mean a few weeks. After the first rate hike, the normalization process will be gradual.
With net purchases of public debt ending in the third quarter of the year, the rally is likely to occur as early as July, according to Bloomberg.
Changes in reference interest rates have an effect on borrowing costs for businesses and citizens (as in housing loans).
Fearing the economic effects of inflation above 7%, many members of the Board of Governors came out publicly in defense of an increase in benchmark interest rates as early as July.
German Isabelle Schnabel, a member of the European Central Bank’s Executive Committee, said last week, “Based on current expectations,” a rate hike is possible at the July meeting.
In a month, in June, the Board of Governors will still meet, and there, Lagarde will be able to clarify the position that then settles within the central bank.
On May 1, European Central Bank Vice President Luis de Guindos also He already admitted that there was “no reason” for the asset purchase program not to expire in July Given the move, he said, “rates will go up from there” in “months, weeks or days.” He said July was a “probable” date, even if that didn’t mean “probable”.
More cautious was the Governor of the Central Bank of Portugal, Mario Centeno, Through public criticism on May 5during the presentation of the Bank of Portugal economic bulletin, which called for an immediate increase in interest rates based on “convictions”.
Centeno even asked his colleagues for “some calm and consideration in these communications” about the strategy the European Central Bank will adopt. “Either we rely on data or someone has access to information that is not available to everyone and there is an inconsistency here. (…) Another thing is, because you have information that others do not have or because you have strong convictions, draw conclusions early on and I I don’t do that,” said the Portuguese governor.
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