ECB Likely to Exit Negative Rates

 

With inflation nearing the ECB’s 2 percent target, the Governing Council has been building momentum to raise the deposit rate from its current level of -0.5 percent in July. Lagarde’s comment suggests two 25-basis-point increases at the July and September policy meetings. 

While Dutch central bank chief Klaas Knot suggested last week that a half-point rate hike might be necessary, Lagarde has repeatedly stated that policy normalisation will be gradual, and she reiterated that sentiment on Monday.

According to President Christine Lagarde, the European Central Bank will likely begin raising interest rates in July and exit sub-zero territory by the end of September. 

“I expect net APP purchases to end very early in the third quarter,” she wrote in a blog post on Monday. “This would allow us to lift rates at our July meeting, in line with our forward guidance.” Based on current projections, we should be able to exit negative interest rates by the end of the third quarter.” 

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