Will the ECB Raise Interest Rates for the First Time in 11 Years? President Lagarde Hints at Possible July Increase

Christine Lagarde, President of the European Central Bank (ECB)
[Photo by Reuters Yonhap News]

[Asia Economy Reporter Byunghee Park] The European Central Bank (ECB) is increasingly likely to raise its key interest rate at the monetary policy meeting on July 21, marking the first hike in 11 years.

Earlier this year, President Christine Lagarde was not confident about a rate hike within the year, but she has now hinted at a possible increase in July. If the ECB raises the key interest rate in July, it will be the first time since July 2011, exactly 11 years ago.

According to major foreign media on the 11th (local time), during her visit to Slovenia, President Lagarde said, "The ECB's asset expansion through bond purchases will be halted in early Q3, and shortly thereafter, the key interest rate is expected to be raised." She added, "Shortly thereafter could mean a few weeks."

With the Eurozone consumer price inflation rate breaking record highs every month and reaching 7.5% in April, voices calling for a July rate hike have been growing recently.

Joachim Nagel, President of Germany's Bundesbank, stated on the 10th that he expects the ECB's net bond purchases to end by the end of June and supports a rate hike in July. Olli Rehn, President of the Bank of Finland and known as a moderate, also said the ECB should raise the key interest rate as early as July.

President Lagarde said, "The end of net bond purchases and the rate hike will give households and businesses the expectation that prices will not rise further." She also emphasized that such tightening measures are important for the ECB's credibility, stating, "It shows that the ECB is committed to fulfilling its mandate of price stability."

President Lagarde added, "The war in Ukraine will accelerate two ongoing structural changes," and said, "It will worsen supply chain disruptions and increase cost-push pressures."

This content was produced with the assistance of AI translation services.