The European Central Bank (ECB) is expected to end its stimulus program in July amid the coronavirus crisis and will raise interest rates “a few weeks later” for the first time in 11 years, the ECB said on Wednesday. President Christine Lagarde. In recent months, high inflation has put a lot of pressure on the ECB to implement an interest rate hike.
Inflation around the world has reached record highs due to the corona crisis and the war in Ukraine. Most central banks have already reacted by raising key rates. If the interest rate is higher, people earn more from their savings and they will leave them longer in their account. As a result, they spend less and that lowers inflation.
The ECB has long been reluctant to raise interest rates, as inflation has nothing to do with monetary issues, but with external factors such as supply problems and the economic recovery after the numerous confinements.
“We won’t start thinking about a rate hike until long-term inflation hits our 2% target,” Lagarde said after the latest meeting. The bank has been repeatedly criticized by experts.
The ECB now seems to be heading for an interest rate hike. Speaking in Slovenia on Wednesday, Lagarde said the bond buying program would end in July and a rate hike is expected “several weeks later”. She gave no specific time. It would be the first time since 2011 that the ECB would raise interest rates.
Inflation in the euro zone hit a record high of 7.5% in April. In the Netherlands, life became 9.6% more expensive last month. This is a slightly smaller increase than March’s 9.7%, but still historically high.