The European Central Bank is still leaving the timing of rate hikes open: ECB President Christine Lagarde announced after the April meeting of the ECB Council that the central bank's net bond purchases should be ended in the third quarter.

So far, this has been formulated somewhat more vaguely.

“Some time after” rate hikes should follow.

That could mean a week later or months later, Lagarde said.

However, she confirmed that she was heading towards a normalization of monetary policy.

Press conference despite corona disease

Christian Siedenbiedel

Editor in Business.

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The ECB President is suffering from Corona and is in quarantine.

Nevertheless, she held the press conference as planned, as an online conference from her home office in Frankfurt.

As a precaution, ECB Vice President Luis de Guindos stood by to step in should her voice fail, as Lagarde herself announced.

The ECB President emphasized that Russia's attack on Ukraine, a "humanitarian catastrophe", had also changed some things economically.

"The war is already weighing on business and consumer confidence, including with the uncertainty it brings," Lagarde said.

Trade disruptions led to new material shortages.

Rising energy and commodity prices weighed on demand and hampered production: "The downside risks to the growth outlook have increased significantly as a result of the war in Ukraine." The ECB President said inflationary pressures were gaining breadth.

Inflation in the euro area had recently amounted to 7.5 percent.

Lagarde therefore pointed out that the ECB was driving on sight.

"Flexibility", "optionality" and "graduality" are three of the central bank's terms for the fact that it does not yet want to commit itself very precisely to monetary policy - and reserves the right to different options and a cautious approach.

Order for normalization should be preserved

The latest economic data suggested it could end net asset purchases in the third quarter, Lagarde said.

She explained that the exact timing of the buy stop could be early or late in the third quarter.

The central bank is thus keeping an interest rate hike open in the second half of the year.

Lagarde stressed that the ECB intends to stick to the planned sequencing for monetary policy normalization: "The sequencing that we have agreed on is: first to complete the net asset purchases and some time after that to decide on the rate hike and subsequent rate hikes."

Lagarde was rather cautious about the central bank's considerations of developing new monetary policy instruments in order to take action against an excessive increase in bond yields in some euro countries.

In the past week there had been agency reports that the ECB was working on appropriate instruments.

However, Lagarde was vague on this.

She said that the central bank had noticed with the PEPP crisis program how important flexibility was in order to avoid fragmentation, i.e. the splitting up of the euro area.

She also wants to continue to focus on flexibility.

Situation in America another

Lagarde emphasized that the situation in the euro area cannot be compared with America.

"That would be like comparing apples and oranges," said the ECB President.

The American Federal Reserve has already raised its key interest rate by 0.25 percentage points, and the ECB is still hesitating.

"The situation in the United States differs in many respects, including the development of unemployment and wages," said Lagarde.

Wages in America have risen much faster than in this country.

The effects of the Ukraine war are of course stronger on the euro area than on the United States.

The Savings Banks Association and economists are criticizing the ECB's adherence to its zero interest rate policy in the face of record inflation.

"Inflation in the euro area is climbing to unprecedented heights, and the ECB must put a stop to that," said the President of the German Savings Banks and Giro Association, Helmut Schleweis, after the interest rate decision.

"As resolutely as the central bankers have fended off the threat of deflation in recent years, they must now take a more restrictive monetary policy against inflation in the euro area with clearness and determination." The longer the ECB postpones the necessary turnaround in interest rates, the greater the risk of a chain reaction from rising prices and higher wage demands.

The Center for European Economic Research (ZEW) has a similar assessment.

"Every month of procrastination damages the reputation of this important European institution," said ZEW economist Friedrich Heinemann.

Federal Finance Minister Christian Lindner was also critical: “It is the mandate of the ECB to ensure stable prices.

The ECB cannot ensure economic growth,” he said: “Inflation is the greatest threat to public finances and prosperity in the long term.”

The Dax increases, the euro gives way

The German share index Dax increased its price gains somewhat after the interest rate decision.

In the afternoon, the leading German index rose by 0.5 percent to 14,151 points.

Because there was no unexpected acceleration in the tightening of monetary policy, investors on the stock exchange took action again, according to the trade.

Meanwhile, the euro continued to lose ground.

The common currency fell 0.6 percent to $ 1.0823.

After all, the central bank is leaving the door open for a turnaround in interest rates - but it has not fueled any hopes of a quicker approach.