On Monday, the President of the European Central Bank, Christine Lagarde, for the first time made a more specific statement about the path of the imminent turnaround in interest rates.
In a blog post, she emphasized, among other things, that the ECB will probably start raising interest rates in July and leave the negative zone at the end of September.
This would mean that the negative interest rates introduced by then-ECB President Mario Draghi in 2014 would end after around eight years.
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"I expect net asset purchases under the APP program to end very early in the third quarter," Lagarde announced.
“This would allow us to hike rates in line with our guidance at our July meeting.
Based on the current outlook, we should be able to exit negative interest rates by the end of the third quarter.”
On the financial markets, the prospect of an imminent end to the ECB's negative interest rates boosted the euro.
The shared currency peaked 1 percent higher to a four-week high of $1.0664.
Lagarde justified the prospect of rising interest rates primarily with high inflation.
This recently rose to a record high of 7.4 percent in the euro area.
Further interest rate hikes depended on the inflation outlook: If inflation stabilizes at two percent in the medium term, a gradual further interest rate normalization would be appropriate, explained Lagarde.
"However, the pace and overall extent of the adjustment cannot be determined in advance."
In the Governing Council, more and more members have recently been pushing for a normalization of monetary policy.
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 so, it intends to raise all key interest rates at the same time or initially only the deposit rate.
Next Governing Council meeting on 9 June
Just under a week and a half ago, Lagarde had already slightly adjusted her choice of words in relation to the first interest rate hike.
Unlike many of her colleagues on the Governing Council, she did not explicitly mention July as the date of the first interest rate hike.
Nevertheless, she used different wording than she used after the April meeting of the Governing Council.
Until then, it was said that the central bank would end net purchases of bonds in the third quarter and hike rates “some time after”.
Suddenly, Lagarde was saying the purchases should be “complete by early Q3” and the time thereafter before the rate hike should be a period of “just a few weeks”.
She had recently prophesied that it could be "days" but also "months".
Apparently, Lagarde is not only reacting to the high inflation - but also to more and more demands from the Governing Council to finally do something.
It was already clear from the recently published minutes of the previous meeting of the ECB Council that rapid interest rate hikes are gaining support from the ECB management.
In monetary policy, a turnaround in interest rates is generally not announced at a press conference, but rather prepared by many statements.
The next monetary policy meeting of the Governing Council is on June 9th.
Then the ECB could announce the end of its net asset purchases.
The next meeting, for which the first rate hike is now expected, is on July 21st.Keywords: