The European Central Bank signalled it will lift interest rates by 25 basis points in July and tipped a potential larger increase later in the year.
The European Central Bank brought down the curtain on years of ultra-loose monetary policy, committing to a quarter-point increase in interest rates next month and signalling a bigger hike is possible in the fall.
That would bring the deposit rate to at least zero by the end of the third quarter, from -0.5 per cent at present, concluding an eight-year stint of negative borrowing costs and affirming a plan laid out last month by president Christine Lagarde.“It is good practice and it is actually often done by most central banks around the world to start with an incremental increase that is sizable, not excessive, and that indicates a path,” Lagarde told a news conference.
The euro slipped 0.2 per cent against the dollar to $US1.0693 after earlier climbing to the highest since May. Traders increased bets on rate hikes, predicting 150 basis points of increases by December. Even as price pressures persist and the economy loses steam, the ECB’s new outlook was somewhat more optimistic than others released this week. Forecasts from the World Bank and OECD reinforced stagflation fears as the Ukraine war saps confidence and supply-chain disruptions in Asia restrain factories.