Negative interest in the euro zone is expected to ease by September

European Central Bank President Christine Lagarde said on Monday that the bank would end its negative interest rate regime by September as the euro zone sees rising inflation.

“We may be out of negative interest rates by the end of the third quarter,” Lagarde wrote in a blog post on the European Central Bank’s website.

“Interest hike in July”
He added that the outcome of the bank’s incentive bond purchase plan “at the beginning of the third quarter” would lead to a “rate hike in our July meeting”.

This increase is the ECB’s first increase in more than a decade and will raise interest rates from their current, historically low level. This includes minus 0.5 of the deposit, which charges banks for depositing their excess funds with the European Central Bank.

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With consumer prices averaging 7.5% in April, Lagarde has come under increasing pressure from his colleagues on the European Central Bank’s board of directors to raise interest rates as soon as possible due to higher inflation in the euro area, an unprecedented rise. And above the bank’s target of 2%.

New price hike
Behind the new price hike lies the Russian invasion of Ukraine, which prompted other central banks to raise interest rates, with the US Federal Reserve raising an unusually high 50 basis points in early May.

Lagarde said any increase above zero would depend on “inflation expectations”. If the expected inflation rate appears to be stable around the ECB’s 2% target, further increases will be “proportional” to it. The policymakers of the European Central Bank will make their decisions at the June 9 and July 21 meetings.