Support for a rapid interest rate hike is also growing in the European Central Bank.

That emerges from the minutes of the ECB Governing Council's previous monetary policy meeting in April, which were published on Thursday.

While some Council members, such as Bundesbank President Joachim Nagel, have been pushing for some time and others, such as Governing Board member Isabel Schnabel, have been supporting this line for some time, this position seems to be gaining ground more and more.

"Acting without undue delay"

Christian Siedenbiedel

Editor in Business.

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"Some members considered it important to act without undue delay," it says.

Finally, concern about the high inflation was articulated in the committee.

At 7.4 percent, the rate of inflation in the euro zone has so far exceeded the European Central Bank's target of 2 percent.

The assessment that inflation will fall below 2 percent again in the medium term also seems to be finding fewer and fewer supporters.

Commerzbank economist Michael Schubert commented: The minutes confirm that all council members support further normalization of monetary policy.

In April, there were still quite different views about the pace of normalization.

However, more recent statements by ECB representatives indicate that even doves in the Council, i.e. the representatives of a rather loose monetary policy, are now in favor of an initial interest rate hike in July.

Members expressed concern about high inflation figures "which have become a major problem for households and businesses.

Both headline and underlying inflation were at historically high levels, with price pressures going well beyond energy prices.”

Had the cost of owner-occupied housing been included in the Harmonized Index of Consumer Prices (HICP), underlying inflation in the fourth quarter of 2021 would have been even higher, by 0.7 percentage point, the minutes said.

The ECB has actually decided to take into account the strong price increases for owner-occupied residential property for monetary policy.

"While there seems to be solid support in the Council for the continuation of monetary policy normalization in general, the report indicates that in April there appeared to have been quite divided views on the pace of normalization," Schubert writes.

It had been stressed that the assessment of the outlook had changed significantly since the March meeting and that if these changes in the outlook were confirmed at the June meeting, concrete steps would be needed to accelerate the pace of policy normalization.

In this context, it was also recalled that acting too late could lead to second-round effects and entail high costs for the economy, financial stability and credibility if the Governing Council were forced to tighten more aggressively at a later date take to stabilize inflation expectations.

Proceed "Gradually and carefully"

ECB Vice President Luis de Guindos said in a video appearance on Thursday that he expected inflation to remain high in the coming months.

But because of the great uncertainty with regard to price developments and the economy, it is important for monetary policy to proceed “gradually and cautiously”.

This is a big difference to America: while the American Federal Reserve is trying to curb inflation with sharp interest rate hikes, the ECB is still planning more cautious interest rate hikes.

Bundesbank chief Joachim Nagel and other currency watchdogs have envisaged a turnaround in interest rates for July.

Dutch central bank governor Klaas Knot even raised the possibility of a half a percentage point hike if inflation were even more broadly based or accelerating in the coming months.

However, an increase of 0.25 percentage points in July seems most likely.

There are several key interest rates: Banks currently still have to pay negative interest if they hoard excess funds at the central bank.

This so-called deposit rate is minus 0.5 percent.

The so-called main refinancing rate for loans is 0 percent, the top refinancing rate is 0.25 percent.

The ECB has not yet clearly announced whether, if

At its next meeting on June 9, the ECB could set the course for the turnaround in interest rates.

As a preliminary step, the billions in net bond purchases are likely to be discontinued.

The ECB has envisaged the end for the third quarter, but recently an end for the end of June had also been brought into play by some monetary watchdogs.

The ECB's announcements so far could obviously also be interpreted to mean that the net bond purchases will expire in June and will therefore be over in the third quarter, after which the interest rate hike can come.

De Guindos now said: "I would expect it to happen sooner rather than later in the third quarter." That could point to July.

A first rate hike could follow "some time" afterwards.

ECB President Christine Lagarde recently formulated her view of "some time later" more specifically and thus promised more speed.

For a long time she said that could mean a few days or a few months later.

Now she spoke of "a few weeks" after that.