Despite record inflation, Europe’s currency watchdogs are still leaving consumers and savers in the dark about the timing of the first interest rate hike. By contrast, there are now clearer signs of an end to the ultra-loose monetary policy in the summer. The European Central Bank (ECB) has started to normalize its monetary policy, said ECB President Christine Lagarde, who attended the press conference after Thursday’s Governing Council meeting online because of a corona infection. Critics accused the central bank of a lack of determination and risky waiting. The ECB has decided not to raise interest rates until it runs out of fresh money in bonds. The ECB left open when interest rates will rise again.
Economists believe that a first rate hike this year is possible. For the time being, the key interest rate remains at the record low of zero percent. However, new data strengthened the Governing Council’s expectation that the net purchases of government and corporate bonds as part of the APP purchase program should be discontinued in the third quarter. At the June meeting, the Governing Council will decide on the end of the purchase program and the future interest rate path, said Lagarde. The new economic and inflation forecasts will also be available at this time. According to Commerzbank chief economist Jörg Krämer, waiting for the central bank is risky. “The longer the ECB sticks to its very loose monetary policy, the more people’s inflation expectations rise and the very high inflation becomes permanent.”