# ECB firms up expectations for July interest rate hike Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-05-11 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: ECB to Raise Rates in July for First Time in a Decade Meta Description: European Central Bank expected to increase benchmark rate for first time in over a decade, hinting at further hikes to combat record-high inflation. URL: https://financedigest.com/ecb-firms-up-expectations-for-july-interest-rate-hikehtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-05-11t171655z1lynxnpei4a0xsrtroptp4ecb-policy-wages-1736815740476-compressed.jpg) LJUBLJANA (Reuters) – The European Central Bank has firmed up expectations that it will raise its benchmark interest rate in July for the first time in more than a decade to fight record-high inflation, with some policymakers even hinting on Wednesday at further hikes after the first. With ECB policymakers clamouring for a rate hike for weeks, President Christine Lagarde has finally thrown her weight behind such a move, saying the central bank was likely to end its stimulus programme early in the third quarter, followed by a rate hike that could come just “a few weeks” later. Most other major central banks have already raised borrowing costs but the ECB, which had fought too low inflation for a decade, is still pumping cash into the financial system via bond purchases. My expectation is that they should be concluded early in the [third quarter,”](https://www.financedigest.com/greek-residential-property-price-recovery-picks-up-in-third-quarter.html "Greek residential property price recovery picks up in third quarter") Lagarde said at a conference in the Slovenian capital. The first rate hike, informed by the ECB’s forward guidance on the [interest rates](https://www.financedigest.com/interest-rates-are-cut-to-an-all-time-low-what-will-this-mean-for-small-businesses.html "Interest rates are cut to an all-time low. What will this mean for small businesses?"), will take place some time after the end of net asset purchases…(and) this could mean a period of only a few weeks. Inflation hit 7.5% in the euro zone last month and even measures that strip out food and energy [prices rose above the ECB’s](https://www.financedigest.com/explainer-oil-price-surge-changes-ecb-narrative-only-at-the-margins.html "Explainer-Oil price surge changes ECB narrative only at the margins") 2% target. What started as a one-off shock has now become a more broad-based phenomenon,” [ECB policymaker](https://www.financedigest.com/euro-zone-bond-yields-fall-as-ecb-policymaker-flags-recession-risk-gilts-eyed.html "Euro zone bond yields fall as ECB policymaker flags recession risk, gilts eyed") Bostjan Vasle said at the same event. When the circumstances change, the policy [response must](https://www.financedigest.com/compliance-must-be-cultural-why-compliance-is-everyones-responsibility.html "Compliance must be cultural: Why compliance is everyone’s responsibility") follow,” the Slovenian governor added. ECB board member Isabel Schnabel said the ECB [needed to act now to protect its credibility and stop inflation](https://www.financedigest.com/inflation-is-on-the-rise-you-need-a-bookkeeper.html "Inflation Is On The Rise, You Need A Bookkeeper") expectations, which have risen to 2% or slightly above, from spiralling out of control. GROWING CALLS The number of ECB policymakers calling for a July hike has been growing almost every day and on Wednesday alone included board member Frank Elderson, French [central bank](https://www.financedigest.com/central-banks-keep-hiking-rates-amid-banking-turmoil.html "Central banks keep hiking rates amid banking turmoil") governor Francois Villeroy de Galhau and Bundesbank president Joachim Nagel. I think that from this summer onwards, the ECB will gradually raise its [interest rates,”](https://www.financedigest.com/hotel-investors-should-they-be-worried-about-a-potential-economic-pause-delving-into-inflation-interest-rates-recession-etc.html "‘Hotel Investors – should they be worried about a potential economic pause?’ delving into inflation, interest rates, recession etc") Villeroy de Galhau told France Inter radio. Estonian governor Madis Mueller also hinted at a series of [hikes that could lift the ECB rate](https://www.financedigest.com/stocks-falter-as-economic-worries-nag-nz-delivers-big-rate-hike.html "Stocks falter as economic worries nag, NZ delivers big rate hike") on bank deposits, which is currently -0.5%, above zero by the end of the year for what would be the first time since 2014. Even if we go by 25 basis point increments, we may get to a positive [rate by the end of the year,” he told Reuters](https://www.financedigest.com/european-central-bank-to-raise-deposit-rate-to-3-25-by-mid-year-reuters-poll.html "European Central Bank to raise deposit rate to 3.25% by mid-year: Reuters poll") in an interview. (Reporting By Balazs Koranyi; Writing by Francesco Canepa in Frankfurt; Editing by Toby Chopra and Hugh Lawson) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---