ECB’s Nagel: Net Asset Purchases May End in June, Rates May Rise in July

20 May 2022

By David Barwick – FRANKFURT (Econostream) – Net asset purchases by the European Central Bank may end in June and a first rate hike could follow in July, ECB Governing Council member Joachim Nagel said on Friday.

In a statement following a meeting of G7 finance ministers and central bank governors, Nagel, who heads the German Bundesbank, said that ‘we know from our survey of firms that most companies in Germany are planning to raise their prices further over the next few months.’

‘Central banks need to ensure that the very strong inflationary pressures do not become entrenched’, he said. ‘We must therefore take decisive action.’

‘When net asset purchases come to an end – possibly in June – I see the time for an initial interest rate hike soon afterwards – possibly in July – as having come’, he said. ‘This could be followed in a timely manner by further interest rate moves.’

Trends relating to de-globalisation, the energy transition and demography would all be sources of further price pressures ahead and ‘inflation dynamics have changed dramatically in a relatively short space of time’, he said.

‘And monetary policymakers must remain vigilant and potentially take further measures to safeguard price stability over the medium term’, he added. ‘Because at our meeting, there was no doubt whatsoever that stable prices are essential to the achievement of our long-term objectives.’