ECB’s Lagarde Repeats 25bp Hike in July with Potential for Larger Move in September
20 June 2022
By David Barwick – FRANKFURT (Econostream) – European Central Bank President Christine Lagarde on Monday reiterated ECB’s intention to hike interest rates in July by 25 basis points and then to take a potentially larger step in September depending on the inflation outlook.
Speaking at a hearing of the Committee on Economic and Monetary Affairs of European Parliament, Lagarde said that ‘price rises are becoming more widespread across sectors and measures of underlying inflation have risen further’ and that wage growth, while still moderate, was expected to ‘strengthen slightly further over 2022 and then to remain above average levels for the projection horizon’.
Correspondingly higher longer-term inflation expectations ‘warrant close monitoring’, she said.
In this context, ‘we intend to raise the key ECB interest rates by 25 basis points at our July monetary policy meeting’ and, ‘looking further ahead, we expect to raise the key ECB interest rates again in September’, she said.
‘If the medium-term inflation outlook persists or deteriorates, a larger increment will be appropriate at our September meeting’, she said.
Further out, ‘we anticipate that a gradual but sustained path of further increases in interest rates will be appropriate’, she said.
Lagarde noted the decision of the ad hoc Governing Council meeting last week to flexibly reinvest maturing assets acquired under the pandemic emergency purchase programme, and to instruct the appropriate Eurosystem committees to speed up their work on a new tool to counter fragmentation.