Economically, the big bad wolf is no longer called recession but inflation.

Concerned by the rise in prices, the European Central Bank could therefore prepare this Thursday for the exit from its controversial policy of negative rates.

The meeting of the Board of Governors, relocated to Amsterdam, must mark a historic turning point after years of cheap and abundant money policy.

It must be said that since December, the ECB has been surprised by the dynamics of inflation, which has accelerated further with the war in Ukraine.

The "hawks" take over the "doves"

The rise in prices thus reached 8.1% over one year in May, with fourteen out of nineteen countries in the euro zone being above this average.

Unheard of since the introduction of the single currency and a level four times higher than the ECB's target set at 2%.

While purchasing power is eroded by soaring prices, the ECB's "hawks" got the better of the more cautious "doves": not acting on rates risked fueling inflationary trends a little more, via salary increases.

Other central banks facing high inflation, the US Fed and the Bank of England, have already started a rate hike cycle.

The ECB, for its part, has locked itself into a very gradual monetary tightening schedule and departing from it now would undermine its credibility.

Thus, the institution should first confirm this Thursday the end of net debt buybacks on the market from the beginning of July.

In this way, approximately 5,000 billion euros of bonds have been bought back by the ECB since 2015, making it possible to maintain favorable borrowing rates for households, companies and States, in a context of sluggish inflation.

These redemptions should still amount to 20 billion euros in June before stopping the following month.

Towards the end of negative rates

In the process, it will be a question of getting out of the policy of negative rates started in 2014 and which has aroused waves of criticism, especially in Germany.

It means that banks are taxed by -0.5% to date on their deposits entrusted to central banks for lack of distributing them via loans.

ECB President Christine Lagarde is expected to announce the schedule for increases on Thursday, with a first increase expected for the July 21 meeting.

An increase of 0.25% in July, followed by another 0.25% in September, would reset the deposit rate to zero, predicts Philip Lane, chief economist of the ECB.

But to cope with the rumbling inflation, "hawks" are pleading for a jump of 50 basis points to be decided in July, a scenario that the markets have begun to integrate.

A first answer therefore this Thursday in a context where the clouds accumulate on the prospects for growth.

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