Voices from the European Central Bank (ECB) calling for a rapid increase in interest rates in the euro area are increasing.

This caused the euro to rise significantly against the dollar on Thursday to more than 1.09 dollars and at the same time pushed up interest rates on the European bond market.

With the federal bond with a term of ten years, the building interest rates in Germany have recently staged an impressive rally to 2.38 percent for building loans with a ten-year fixed interest rate - until recently, these were just over zero percent.

Christian Siedenbiedel

Editor in Business.

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All of this shows that the turnaround in interest rates in Europe is not a question of if, but only a question of when.

Not only individual governors from euro countries are now pushing.

On Thursday, ECB Vice President Luis de Guindos, a member of the Executive Board of the central bank, officially said in an interview that the ECB could end buying new bonds in July and raise interest rates in the same month.

That would not contradict the ECB's previous communication, but it would be the shortest possible time.

Bundesbank President Joachim Nagel made a similar statement on Wednesday at the spring meeting of the International Monetary Fund (IMF).

He had described the end of the bond purchases at the end of the second quarter, i.e. in June, and the first interest rate hikes in July as possible.

Latvian Councilor Martins Kazaks also said: "A rate hike in July is possible." Councilor Pierre Wunsch from Belgium said a rate hike in July was "certainly a scenario I would consider".

After all, inflation in the euro zone climbed to a record high of 7.4 percent in the history of monetary union.

The European statistics office Eurostat corrected an initial estimate from the beginning of the month slightly downwards on Thursday from 7.5 percent.

Inflation is still well above the ECB's medium-term target of 2 percent.

Energy prices rose particularly sharply with a plus of 44 percent.

Food, alcohol and tobacco prices rose 5 percent, while services rose 2.7 percent.

In individual euro states such as the Baltic countries, but also in the Netherlands, inflation rates are already in the double digits.

Lithuania is now at the top with 15.6 percent.

So far, an interest rate hike in the euro area was expected on the financial markets in autumn.

With hints of an earlier rate hike, demand for the euro increased on the foreign exchange market - this was the reason for the exchange rate increase against the dollar.

Previously, the different orientations of monetary policy between America and Europe had weighed on the common currency.

In the middle of the month, the euro fell to its lowest level against the dollar since spring 2020.

While the American central bank, the Federal Reserve, completed the turnaround in monetary policy and decided to raise interest rates for the first time in March, the euro was burdened by the ECB's hesitation.

A stronger euro would tend to make business more difficult for German exporters because their goods would become more expensive on world markets.

However, the current difficulties with high energy prices could be cushioned somewhat if a stronger euro made imports cheaper.

Clemens Fuest, President of the Ifo Institute, emphasized this again on Markus Lanz's talk show: "If the euro is stabilized, many imports will become cheaper, and that will also help against inflation."

Holger Schmieding, chief economist at Berenberg-Bank, was cautious about whether he was now firmly expecting a rate hike in July.

The range of opinions in the Governing Council is still large, he said.

A compromise could perhaps be a rate hike in September, said Schmieding.

So far, the ECB had announced an end to net bond purchases in the third quarter, i.e. the months July to September, and the first interest rate hikes "some time afterwards" - which, according to ECB President Christine Lagarde, was both a week later and a few months later could mean.

Lagarde had promised concrete decisions on when the net bond purchases should end at the next monetary policy meeting of the ECB Council on June 9th.