ECB signals rate hike as soon as July to combat inflation

ECB signals rate hike as soon as July to combat inflation

FRANKFURT: European Central Bank chief Christine Lagarde hinted Wednesday at a first interest rate hike in July to tackle soaring inflation, echoing the actions of other major central banks and heralding the end of the eurozone’s cheap money era. The ECB should end its bond-buying stimulus “early in the third quarter” and could raise interest rates “only a few weeks” later, Lagarde said in a speech in the Slovenian capital Ljubljana. The comment is the clearest sign yet from Lagarde that the ECB is ready to move on rates sooner rather later, as the institution trails rate hikes made by the US Federal Reserve and others to tame global inflation.

Any hike would be the ECB’s first in over a decade and would lift rates from their current historically low levels. These include a minus 0.5 deposit rate which effectively charges banks to park their excess cash at the ECB overnight. Inflation in the eurozone climbed to 7.5 percent in April, an all-time high for the currency club and well above the ECB’s own two-percent target.

The surge, driven in no small part by steep increases in prices for energy due to the Russian invasion of Ukraine, has strengthened calls for the ECB to