ECB may raise interest rates as soon as this summer

The European Central Bank (ECB) may soon raise interest rates for the first time in more than a decade, a member of the ECB Executive Council told CNBC.

ECB is considered to be slower in the process of tightening monetary policy compared to other central banks. However, the expectation that this bank will soon raise interest rates has increased sharply in the past few months, in the context of complicated inflation. Many experts predict this bank will raise interest rates at least 4 times for the rest of 2022.

“We are on the right track,” Joachim Nagel, president of the Bundesbank, one of the ECB’s supporters of policy tightening, told CNBC.

“In our important meeting in March, we agreed to stop the asset purchase program, and in the next meeting in June, based on the economic data at that time, we may decide to plan to stop this program altogether, and after that, I believe the ECB will raise interest rates soon,” he said.

According to his share, it is very likely that the ECB will raise interest rates in July, when the ECB will discuss new economic forecasts released in the previous month.

Nagel said he has repeatedly warned of high inflation since becoming head of the Bundesbank.

“I am extremely grateful that many of my colleagues on the Executive Council share this view,” he said.

Earlier, Francois Villeroy de Galhau, Governor of the French central bank, said he expected the ECB to start raising interest rates from this summer. Meanwhile, Ignazio Visco, Governor of Italy’s central bank, told CNBC that “ECB will probably raise interest rates in the third quarter or the end of 2022, but it won’t be too drastic.”

Central banks are under pressure to control inflation, as prices of consumer goods continue to rise, triggering a crisis of living standards.

The US Federal Reserve in early May raised interest rates by 0.5%, the strongest increase in 22 years, and this is also the agency’s second rate hike in 2022. Inflation in The US is currently approaching a 40-year high. Accordingly, the consumer price index in the world’s No. 1 economy increased by 8.3% over the same period in 2021 in April.

The Bank of England has also just raised interest rates for the fourth time since the country entered the post-pandemic normalization phase in December 2021. Inflation in the UK reached 9%, the highest in 40 years, in April.

However, the ECB remains relatively cautious about raising interest rates. The agency’s view is that price pressures will ease in the second half of the year.

Inflation in the euro area rose to a record high for the sixth consecutive month in April 2022, in the context of the Ukraine conflict and bottlenecks in the energy supply chain having a strong impact on the eurozone’s economy. area.

The bloc’s headline inflation hit 7.5% in April 2022, surpassing the 7.3% mark in March.

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