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ECB’s Lagarde sees strong chance of a rate hike this year -Breaking


© Reuters. FILEPHOTO: Christine Lagarde is President of European Central Bank, speaking during joint press conference with Nicos Anastasiades, the President of Cypriot President. This was at the Presidential Palace in Nicosia (Cyprus), March 30, 2022. REUTERS/Yiannis Kourtoglou REFILE – QUALITY REP

WASHINGTON, (Reuters) – The European Central Bank will likely end its bond buying scheme early in the third quarter, and increase rates before the end, Christine Lagarde, President of European Central Bank, told CNBC Friday. She also explained the bank’s withdrawal from stimuli.

Inflation is at an all-time high and rising. The ECB has been carefully withdrawing its support over the past months. Now, policymakers openly discuss the possibility for an interest rate increase, the first time the bank has raised it in over a decade.

Lagarde stated that rates could be raised if the current situation is maintained as it stands. It remains to be determined how much and when, as data will dictate.

Although the ECB announced last week that they will cease bond purchases (also known as quantitative easing), Lagarde suggested the change should take place in the second quarter.

This timeline suggests that the ECB may be able to increase rates at its July 21 meeting. Bond buys are a prerequisite for any rate change.

The inflation rate was at 7.5% in the last month. That’s nearly four times that of the ECB target of 2%. However, it could continue to rise through mid-year.

The ECB is facing a difficult time because of high oil prices and Russian sanctions. These are affecting confidence and reducing purchasing power, which in turn affects growth.

Lagarde stated that the bloc’s economic growth will continue and that stagflation, which is a time of low inflation with stagnating output, was unlikely.