Christine Lagarde has signalled she would support raising the European Central Bank’s main interest rate in July, leading economists to declare that the first increase for more than a decade is almost certain to go ahead.
The ECB president said in a speech in Slovenia on Wednesday that she expected the bank to stop expanding its balance sheet through bond purchases “early in the third quarter” and to then raise rates “some time” after that, which “could mean a period of only a few weeks”.
Lagarde added that “actions that demonstrate our commitment to price stability” would be critical in ensuring businesses’ and households’ expectations of future inflation did not rise any further and test the credibility of the central bank. Eurozone inflation hit a record 7.5 per cent in April — almost four times the central bank’s target of 2 per cent.