Most recently, several ECB representatives had announced a rate hike for July. On Wednesday, ECB Director Frank Elderson spoke of the possibility that key interest rates could rise in July. The head of the Deutsche Bundesbank, Joachim Nagel, warned to hurry in view of the record inflation in the euro area. It is important to act quickly to avoid second-round effects such as prices and wages escalating and inflation expectations getting out of control.
Lagarde’s statements are compatible with the July deadline. After an initial rate hike, further hikes should be gradual, she said. The Frenchwoman pointed to inflation, which is likely to remain high for some time. In April, inflation rose to 7.5 percent. This was the highest level since the introduction of the euro.
Interest rates at record lows
The key interest rates in the currency area are at record lows. The deposit rate at which banks can park money at the ECB is minus 0.5 percent. So you have to pay money for it. The key interest rate is currently 0.0 percent. The next ECB interest rate meetings are scheduled for June 9th and July 21st. After that, the Governing Council of the ECB will not meet again for a regular monetary policy meeting until September. The background to the long, very low interest rates are several crises, including the euro crisis and the pandemic. Other western central banks, such as those in the USA and Great Britain, have already raised their interest rates.
Source: Nachrichten
